Retirement Security

Basics
Pensions are an effective and cost-efficient way of helping ensure workers can maintain their standard of living in retirement. But the foundations of retirement security, social security benefits and private pensions, are weaker now than they have been in a generation. Despite is enormous popularity and demonstrable success (see video on following tab), the social security system is under almost constant attack. And the security of job-based pensions has been eroded by the shift from “defined benefit” (a pooled retirement plan, usually funded by employers, that offers a predictable defined monthly benefit in retirement) to “defined contribution” (in which benefits are based solely on plan earnings and enrollment is often voluntary) plans. In 1975, nearly 90 percent of private sector pensions were defined contribution plans. Today, that share is closer to one third. So while the share of private sector workers enrolled in pension plans has not changed much over recent decades, those plans are less secure—and dramatically less common for lower income workers.

It is these trends which have, in part, generated the controversy over public sector pensions—most of which remain “defined contribution” plans. However, the problem is often viewed in the wrong way: It is not that public-sector workers have overly generous retirement benefits, but that private-sector workers are increasingly facing an insecure retirement because so many of the benefits that were once considered basic have been eroded or eliminated.

Current Landscape
Much of the action at the state level recently has been defensive—and includes efforts to defend social security and dig in against attacks on public sector pensions. A few states have pushed forward with legislation to support Universal Voluntary Retirement savings Accounts, which use a state’s existing retirement or investment infrastructure to pool the investments of thousands of workers at small- and medium-sized businesses. The Economic Opportunity Institute has led this fight, and maintains close track over its progess in a number of states.

FAQ
Is Social Security broke (or going broke)?

No. The social security system is financed by dedicated payroll taxes, a system which has been tweaked over the years to ensure its continued solvency. By current projections, the program can pay full benefits until at least 2037—after which a small adjustment (raising the wage cap, or the contributions rate) could ensure full funding well beyond that date.

Are generous pension plans for public sector workers bankrupting states?

No. Pension contributions for state and local employers account for well under 5% of state and local budgets (an estimate from the National Association of State Retirement Administrators puts the cost of pensions at just 2.9% of state spending; the Center for Retirement Research has a slightly higher estimate but still pegs the cost at just 3.8% of state budgets).

Learn More
For the basics on retirement security, consult to the National Institute on Retirement Security, the AFL-CIO’s research and resource page on retirement security, and the Center for Retirement Research at Boston College—whose National Retirement Risk Index (NRRI) measures the percentage of working-age households that are at risk of being unable to maintain their pre-retirement standard of living in retirement. The Center for Economic Policy Research offers common sense reporting on social security finances and public sector pensions. Social Security Works and The National Women’s Law Center both maintains state-level fact sheets on the importance of social securit. Among state-level groups, The Economic Opportunity Institute in Washington State is an important voice (and innovator) on this issue.

Video: Social Security 101

Recent Research Highlights

November 21, 2011

August 22, 2011

November 21, 2011

November 10, 2011

November 18, 2011

Added November 18, 2011 Source: Economic Opportunity Institute
Issue: Retirement Security
State: Washington

August 22, 2011

November 18, 2011

November 10, 2011

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