|Poverty Rate Nearly Doubles for Americans Lacking Pensions|
July 26, 2012, Rates of poverty among older households lacking pension income were approximately nine times greater than the rates among older households with DB pension income in 2010, up from six times greater in 2006 a new study calculates.
Pension Income in 2010 Resulted in Public Assistance Savings of $7.9 Billion, 4.7 Million Fewer Households in Poverty or Near-Poverty
Webinar on Thursday, July 26, 2012 at 11 AM ET to Review Findings.
WASHINGTON, D.C., July 26, 2012 – Rates of poverty among older households lacking defined benefit (DB) pension income were approximately nine times greater than the rates among older households with DB pension income in 2010, up from six times greater in 2006 a new study calculates. Older households with lifetime pension income are far less likely to experience food, shelter, and health care hardship, and less reliant on public assistance. The data also indicate that pensions are a factor in preventing middle class Americans from slipping into poverty during retirement.
These findings are contained in a new report, “The Pension Factor 2012: Assessing the Role of Defined Benefit Plans in Reducing Elder Economic Hardships,” an update of a similar study conducted in 2009. The report was authored by Dr. Frank Porell, Professor of Gerontology at the University of Massachusetts-Boston, and Diane Oakley, Executive Director at the National Institute on Retirement Security (NIRS).
"This report sounds an alarm bell for policymakers and taxpayers alike,” said Diane Oakley, NIRS executive director. “We’ve documented a substantial increased risk of elder poverty for Americans lacking pensions that coincides with an alarming decline of pension coverage. These findings couldn’t come at a worse time. Some 75 million Baby Boomers are beginning to retire. Yet, less than half of older American households today can count on a modest pension income that will last for their lifetimes. Worse yet, the ongoing financial crisis has eroded individual retirement savings and home values.”
Oakley continued, “Now, we’re now staring at a future with older Americans – many of them middle class – who may be unable to pay their basic bills and at risk of falling into poverty. There is a steep price to pay when older Americans can no longer be self-sufficient in retirement – either as increased public assistance costs to taxpayers or backsliding to a time with elder Americans living in poverty.”
Report co-author Dr. Frank Porell said, “The analysis indicates pensions exert an independent, positive impact on older Americans’ economic well-being – an effect we call the ‘pension factor.’ This ‘pension factor’ is particularly strong for more vulnerable subpopulations of elder households. In fact, gender and racial disparities in poverty rates, material hardships, and public assistance rates are greatly diminished, and in some cases nearly disappear, among households receiving pension income. The bottom line is that households with a pension fare better than those without – even after controlling for socio-demographic factors such as education, race, gender, and work history,” said Porell.
Porell added, “In 2010, governments spent about $7.9 billion dollars less on public assistance to older households because of pension income. This represents about 6.4 percent of aggregate public assistance dollars received by all American households from similar benefit programs. These are substantial dollars, particularly in light of the growing financial pressure on government programs in the wake of the financial crisis.”
More specifically, the report estimates that in 2010, DB pension receipt among older American households was associated with:
More broadly, the study also finds:
Additional data and analysis is available in the full research brief available at www.nirsonline.org.
The National Institute on Retirement Security is a non-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 has a diverse membership of organizations interested in retirement including financial services firms, employee benefit plans, trade associations, and other retirement service providers.
kkenneally at nirsonline.org