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.
In 8 years, racial disparities in life expectancy might cost the U.S. $1.6 trillion by Alessandra Malito. A new report from AARP found that racial disparities in life expectancy could come with a steep cost to the US government, demanding as much as $1.6 trillion by 2030. For instance, marginalized groups tend to be hit hardest by economic downturns, and therefore are more likely to enter into early retirement. For workers who depend on defined-contribution style plans, early retirement presents the risk of running out of cash long before a retiree reaches the end of life. However, defined-benefit pension plans are a proven income equalizer for minorities and groups with suppressed socioeconomic status, including Black women and Latinos. With a secure income guaranteed in retirement, factors like healthcare costs and everyday living expenses would incur less reliance on government assistance for older Americans.
What is Pension and How Does it Work? by Jane Meggitt. A timely review on pensions and defined-benefit plans, this article reiterates the “great deal” that is a defined-benefit retirement plan. A pension provides a fixed monthly income for life following retirement. For over three decades, pensions have been under attack, with many state and local politicians pushing to end state pensions systems in favor of cash-balance or 401(k) plans. However, defined-benefit pensions have lower fees, longevity risk pooling, and asset diversification, all of which contribute to the overall retirement security for aging retirees. The public sector workforce is the last frontier of defined-benefit retirement plans, much to the chagrin of politicians who perpetuate myths and untruths about public pensions, their funding, and their importance to retaining a robust workforce.
Retirees with Pensions Slower to Spend 401k by Center for Retirement Research. It is well known that pensions have been under attack for decades. A new study from the Center for Retirement Research made startling discoveries on the impact of curtailing pension plans, concluding that baby boomers without defined-benefit pensions or annuities are burning through their 401(k)s faster than anticipated, leaving them financially vulnerable in advanced age. The study also concludes that compared to previous generations, baby boomers without steady defined-benefit income are likely to exhaust their savings around age 85. Rolling the dice with life expectancy is a major pitfall of retiring without a lifetime guaranteed income, leaving many retirees who are reliant on savings and 401(k)-style retirement plans unable to plan for a longer lifespan or unexpected expenses.
Be sure to check back in next Friday for the latest news in the fight for a secure retirement!