Research Says Shift Away from Pensions Harming Retirement Readiness, Increasing Hardship Risk

May 22, 2008, Washington, D.C. – The National Institute on Retirement Security today has issued its first retirement research Issue Brief and launched www.nirsonline.org. 

The Issue Brief, “Retirement Readiness: What Difference Does A Pension Make?” finds that the recent shift away from traditional pensions has coincided with a decline in retirement wealth for the typical household, reducing retirement readiness and increasing the risk of hardship in old age.  As a result, fewer working families will have a good chance of maintaining a middle-class living standard in retirement.  The research brief also suggests areas for policymakers to consider for expanding pension coverage.  

The web site offers exclusive access to an excerpt of retirement economics expert Teresa Ghilarducci’s new book, “When I’m Sixty-Four: The Plot Against Pensions and the Plan to Save Them.”  Additionally, the site encourages ordinary Americans to communicate their retirement challenges, which will help to shape NIRS’ research and education initiatives.

“Just a decade ago, there wasn’t a need for an organization like NIRS,” said Beth Almeida, NIRS executive director.  “After a lifetime of work, most middle class Americans could expect to retire at a reasonable age with a modest income that would last until death.  But times have changed, and it is getting tougher to retire – and impossible for some,” Almeida added.

“As noted in the Issue Brief, the evidence is clear that defined benefit pensions provide the best path to retirement readiness for ordinary Americans,” said Almeida.  “If we hope to rebuild the promise of retirement security, it will mean protecting, strengthening, and expanding pension coverage in a manner that meets the needs of employers and workers.” 

The premier Issue Brief examines a broad range of key retirement reports and data to conclude:  

• The shift from traditional pensions to defined contribution plans in the private sector has reduced the amount of money set aside for retirement, leading to a reduction in retirement wealth for the typical worker. 
• Large numbers of Americans will fall short in retirement, leaving older Americans with inadequate income to be self-sufficient or in poverty. 
• Middle class workers with pensions are less likely to be at risk in retirement. 
• Pensions tend to be better at ensuring employees are able to accumulate adequate resources for retirement. 
• Key features distinctive to pensions seem to make a significant impact on retirement readiness. 

The Issue Brief suggests that policymakers focus on shoring up existing pension plans by revisiting the rules governing the funding of private sector pensions and examining existing defined benefit pensions that insulate employer contributions from shocks, reduce large swings in contributions, and secure employee benefits.  Over the long term, it will be necessary for policymakers to identify channels to establish new plans and expand existing plans by pooling of funds across employers, industries and occupations, as well as exploring the role of the government in serving as an incubator for new, well-functioning, secure pensions.

The web site is a tool to provide policymakers, experts, the media, and interested Americans with access to reliable and thought provoking research reports and briefs, commentary, and news about the traditional pension system in the U.S.  Some of the noteworthy site features include:

• Full access to the premier NIRS Research Issue Brief, “Retirement Readiness:  What Difference Does A Pension Make?” reviewing the role defined benefit pensions play in ensuring that Americans can be self-sufficient in retirement. 
• A venue for Americans to submit information on their retirement challenges.
• A Book Corner with reviews of notable books focused on retirement security.
• A Report Fact Check, with analysis and review of various retirement research reports.
• A Commentary section that provides a forum for NIRS staff and guests to post short blogs and longer colums on key issues. 
• A sign up function so that interested parties can receive regular updates.

NIRS will distribute a regular stream of reports and data, while continually adding resources, educational materials, and functionality to the web site. 

About NIRS
The National Institute on Retirement Security (www.nirsonline.org) is a not-for-profit organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers, and the economy through national research and education programs. Located in Washington, D.C., NIRS seeks to encourage the development of public policies that enhance retirement security in America.

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