Welcome to the latest edition of This Week in Pensions! We have gathered the best stories about pensions and retirement security from the previous week. This is the news you need to know in the fight for a secure retirement.
State and local pension plan funding levels again tick upward, MissionSquare Research Institute Finds by MissionSquare Research Institute. According to a report by MissionSquare Research Institute, funding levels of public pension plans continue to make significant improvements as they continue to recover from the impact of the Great Recession and failed funding practices by lawmakers. Current funding levels are the highest they’ve been since 2010. The research found that as of December 2021, funding statuses nationwide improved from 72.2% to 75.4%. Increasing funding levels accredited to implementing sustainable funding practices such as making the total actuarial required contribution by state and local governments. Additionally, improvement is the result of the recovery of the financial markets after they dipped in March of 2020 with the onset of the pandemic. Senior Research Analyst Gerald Young said, “Robust financial markets certainly are playing a role in higher funded ratios. We also see that regardless of a pension plan’s historical funded status, plan contributions are at or near the actuarially required levels. Failure to make required pension contributions on time and in full can lead to long-term funding shortfalls.”
Retirement Is Complex And Expensive, But Pensions Have Built-In Advantages by Dan Doonan. In his op-ed for Forbes, Dan Doonan, National Institute on Retirement Security Executive Director, makes multiple points about why defined-benefit pension plans are the best option for U.S. retirees. Defined-benefit plans provide a more secure benefit at a lower administrative cost due to the pooling of longevity risks, higher investment returns, and a more “balanced” collection of assets. Longer life expectancies have caused many Americans participating in defined-contribution plans too often find themselves unable to make ends meet if they outlive their retirement savings. Retirees participating in a defined-benefit pension plan receive monthly checks for the rest of their lives, eliminating this struggle. Defined-benefit plans are able to outperform defined-contribution plans because they are able to pool assets across many individuals and optimize investment risk. Because defined-contribution plans are individually managed, they do not have as much money to invest and are less resilient to market fluctuations.
Be sure to check back in next Friday for the latest news in the fight for a secure retirement!