Welcome to this month’s first edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Before you dive into our top stories from this week, check out some stories of public employees helping their communities.
Here are the top stories from this week:
Vermont pension reform taskforce seeks common ground by Calvin Cutler. Last Friday, members of the Vermont Pension Benefit and Funding Task Force met for the first time to discuss studying the state’s unfunded liabilities. The creation of the task force emerged after State House Speaker Jill Krowinski introduced a proposal in April that would have increased employee contributions and the state retirement age, as well as eliminating cost-of-living adjustments (COLAs) for retired public employees. The plan, which was drafted without input from the public employees who would have been impacted by the proposed changes, was tabled in lieu of creating the task force which includes representation from public employees.
Black Workers More Optimistic About Jobs, Less So About Retirement by John Waggoner. This week, AARP released a new study on how Black workers view their financial outlook which reveals that, while many feel increasingly optimistic about their immediate financial prospects, a majority are concerned about their ability to achieve a secure retirement. According to the survey, less than half of Black workers said they were likely to achieve financial security and avoid being a burden in retirement. They also identified several challenges that exist in preparing for retirement, with 54% citing lack of the money as the biggest barrier, followed by debt at 40% of respondents, and affording the cost of healthcare at 14%. Defending pensions is an important way to guarantee Black workers’ retirement security, as “Black households are almost as likely to have a pension as white households are, and with it, the security of knowing they can retire with dignity.”
Now Is The Time To Re-Think Retirement Plan Conventional Wisdom by Dan Doonan. Doonan, the Executive Director of the National Institute on Retirement Security (NIRS), writes in this op-ed for Forbes about how the shift from defined-benefit pensions to defined-contribution accounts like 401(k)s in the private sector has cost employers more, while sacrificing employees’ retirement preparedness. NIRS has found that, as a percentage of payroll, defined-benefit plans are cheaper to implement than defined-contribution plans due to their ability to collectively pool risk, implement more balanced investment portfolios, and offer lower fees. The gradual transition to defined-contribution accounts in the private sector has also increased workers’ retirement insecurity, as the Boston College Center for Retirement Research has reported that “half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living.” Thankfully, most public employees will still be offered a traditional defined-benefit retirement plan which provides a secure retirement.
They Didn’t Expect to Retire Early. The Pandemic Changed Their Plans. by Nelson D. Schwartz and Coral Murphy Marcos. When the coronavirus pandemic-induced economic crisis began in March 2020, Dana and Dee Dee Patten saw work at their mechanical repair shop in Platteville, Colorado slow to a virtually complete stop. Even though neither had wanted to retire early, the downturn was a contributing factor in their decision. The Pattens are ones of millions of Americans who exited the workforce earlier than they anticipated over the past year and a half, with the effects particularly pronounced on middle and lower-income workers. According to research from Teresa Ghilarducci, a professor at the New School for Social Research, 55% of recent retirements from those who earned incomes at the national median or below were involuntary. In what Ghilarducci calls “a tale of two retirements,” only 10% of recent retirements were involuntary for those in the top 10% of earners. These stories illustrate that pensions will continue to play a critical role in helping ensure public employees do not enter poverty when they retire.
Be sure to check back next week for the latest news in the fight for a secure retirement!
