Last week, the National Institute on Retirement Security (NIRS) released its bi-annual Pensionomics report, which details how spending from defined-benefit pensions boosts economies in communities across the country and continued to do so during the Covid-19 pandemic.
The report measures the economic impact of pensions by calculating the total benefits paid out to participating workers, expenditures from these benefits, and the subsequent economic output the pensions spurred (jobs, tax revenue, etc.).
NIRS found that in 2020, $612.60 billion in pension benefits were distributed to nearly 25 million retirees in the private and public sectors. Of that $612.60 billion, $334.8 billion was paid to 11 million retired state and local public employees and beneficiaries.
In the hands of recipients, these dollars stimulated the economy. The report calculated that pension spending supported nearly 7 million American jobs. It also generated $1.3 trillion in total economic output nationwide–each dollar paid out in benefits doubled to over two dollars in total economic output.
This spending also provides valuable tax revenue, creating $157.7 billion in federal, state, and local tax revenue. This shows how pensions are a great source of revenue for all levels of government, funding the services we depend on, like schools, roads, and clean water.
Tax revenue also wasn’t the only benefit taxpayers saw from pension spending. Because pension plans are pre-funded, only a small portion of pension funding comes directly from taxpayers. According to NIRS, state and local pension funding comprised 61% investment earnings and 12% employee contributions between 1993 and 2020. NIRS found that each taxpayer dollar contributed to public pensions supported $7.89 in total economic output. Since investment earnings make up the bulk of a plan’s funding, each taxpayer dollar invested into public pensions will have a greater multiplier effect because “only 27 cents of every dollar paid out in pension benefits in 2020 was generated through taxpayer contributions,” according to NIRS.
This new report from NIRS demonstrates that public pensions not only provide a secure source of income for many Americans, but they also are an excellent return on investment for communities nationwide. They must be protected so all public employees can retire with security and dignity.
You can find state-specific information on how pensions have benefited your state here.
