A recently published article by the National Institute of Retirement Security found that a whopping 85% of Americans surveyed are concerned about their retirement prospects. Also, 83% of Americans surveyed report favorable views of pensions (also known as defined benefit or DB plans) and 82% indicate they believe that those with DB plans are more likely to a have a secure retirement. What is also interesting is that about 59% of Americans surveyed say the availability of pensions was a factor in their decision to work for their current employer. Americans feel that our leaders in Washington do not understand families’ and individuals’ struggles to save for retirement.
This all comes on the heels of action that plan sponsors of DB plans are taking to freeze or terminate their plans and also as many participants are realizing that their 401(k) plans will not provide adequate replacement income when they retire. As many Americans continue to be concerned about outliving their retirement savings, longevity benefits are gaining interest. DB plans have built-in longevity features that provide a stream of annuity payments for a participant’s lifetime. Given that DB plans place all the risk on the plan sponsor and that defined contribution (DC) plans, such as 401(k) plans, place all the risks on the individuals, many employees overwhelmingly support congressional action to provide all Americans with access to a new type of privately run pension plan. The proposed new plan would be portable from job to job, allow for a regular check that lasts throughout retirement, and easy for employers to administer while offering professional money management. The characteristics are similar to a possible proposal by the U.S. Senate called Universal, Secure, and Adaptable (USA) retirement funds.
The survey also provides many interesting facts about Millennials. They believe the current retirement system is broken and about 95% of those surveyed believe lawmakers need to make retirement reform a higher priority.
About 65% of Americans surveyed support protecting Social Security and say that it is a mistake to cut government spending in such a way that reduces Social Security benefits. About 73% of Americans surveyed support pension benefits for public workers because some segments of the public workforce have high-risk jobs and/or lower pay. In addition, public employees contribute toward their pension benefits with each paycheck.
Finally, the survey confirmed that a majority of Americans, about 87%, believe that the increasing number of Baby Boomers retiring without pensions and adequate savings is straining families and the economy.
There is a long way to go before changes could potentially be made to fix the current retirement system. However, if more and more Americans believe that their retirement security is endangered, communicating that to congressional leaders may create a chance for change in the future. DB plans have been the cornerstone of retirement security for our parents and it should be available to new generations as they retire in subsequent years.