This report finds that New York City’s defined benefit pension plans can deliver the same retirement income at nearly 40% lower cost than defined contribution 401(k)-type individual accounts.
Superior investment returns. The pooled nature of assets in a defined benefit plan result in higher investment returns, partly based on the lower fees that stem from economies of scale, but also because the assets are professionally—not individually—managed. The City plans’ enhanced investment returns save from 21 percent to 22 percent, according to the report.
Better management of longevity risk. Because pensions pool the longevity risks of a large number of individuals and can determine and plan for mortality on an actuarial basis, New York City’s defined benefit plans save between 10 percent and 13 percent compared to a typical defined contribution plan.
Portfolio diversification. Unlike defined contribution plans, pension assets can be invested for optimal returns. Individuals using 401(k)s, by comparison, are advised to rebalance their investments, downshifting into less risky and lower-returning assets as they age. This ability to maintain portfolio diversity in the City’s defined benefit plans saves from 4 percent to 5 percent.
The study was conducted by the National Institute on Retirement Security and Pension Trustee Advisors on behalf of the Office of New York City Comptroller John C. Liu. It is based on a similar national report conducted by NIRS, and uses current data from the five New York City retirement systems. The study found that costs associated with traditional pensions range from 36 percent to 38 percent less than 401(k)-type individual accounts.
Evolution and Growth: How Public Pension Plans Have Diversified Their Investments Amid Changing Markets
A report from the National Institute on Retirement Security (NIRS) and Aon examines the changes public pension plan investing has undergone throughout the twenty-first century.
Pensionomics 2025: Measuring the Economic Impact of Defined Benefit Pension Expenditures
Pensionomics 2025: Measuring the Economic Impact of Defined Benefit Pension Expenditures finds pending powered by U.S. private and public sector defined benefit pensions contributed significantly to the economy. In 2022, retiree spending of public and private sector pension benefits generated $1.5 trillion in total economic output, supporting 7.1 million jobs across the nation.
In partnership with AARP and NRTA, NIRS has developed a series of state-by-state infographic fact sheets regarding the public employee and teacher retirement systems across the country.
These fact sheets present a snapshot of these retirement systems along with key data from NIRS research and other sources.
What Do Americans Think About Pensions For Public Employees?
A research infographic from the National Institute on Retirement Security (NIRS) finds strong support among Americans for retirement benefits provided to state and local government employees. “What Do Americans Think About Pensions For Public Employees? finds 86 percent of Americans say all workers, not just those employed by state and local governments, should have a […]
