Pensions make a secure retirement

Bridget Early
Aug 31, 2018 · 3 min read

My dad loves to remind of two things on my birthday. The first, that I came home from the hospital in a Pontiac GTO. “Now that’s what I call a fast start to life.” The second, that he’s been a union electrician for as long as I’ve been around.

My dad began his career in 1983 as an apprentice and worked in his trade for 34 years. During that time, he provided a modest, working class life for me and my family. Now he is making his transition into retirement. Fortunately for my dad, he worked under a collective bargaining agreement that ensured a pension for him, so he can finally enjoy the fruits of his labor. Unfortunately, this kind of secure retirement will not be available to a vast majority of millennials.

Sometime between when my dad entered the workforce and when I entered, pensions came under attack. Around the 1940’s, pensions were the standard bearer of retirement. Our parents and their parents were able to retire with dignity after long careers. Fast forward to the 1980’s and the dawn of the 401(k). Driven by greed, companies stopped offering pensions and switched to 401(k)s, which put all of the liability on the employee, instead of sharing the financial burden.

401(k)s were never supposed to be the primary source of retirement income. They were intended to supplement a defined benefit pension and Social Security. Arguing for “more personal freedom and power for employees,” business executives moved away from pensions and fully into 401(k)s.

The reality is, 401(k)s do not provide any sort of freedom for workers. Instead, it is leaving workers woefully ill-prepared for retirement by ensuring that no one has enough savings to support themselves in retirement. Rather than pooling risk in a big pension fund, 401(k)s expose each employees’ account to the whims of the stock market.

Earlier this year, the National Institute Retirement Security conducted a study that showed how two-thirds of Millennials have nothing saved for retirement, and those who do have savings do not have enough to securely retire. Without adequate savings for retirement, we could see an entire generation of workers unprepared to exit the workforce. To pile on, Millennials suffer through crippling student loan debt, suppressed wages after the Great Recession, and a housing market that makes affordable housing unreachable for many. It may seem far off now, but retirement security (or insecurity) for Millennials is a major problem that needs to be addressed.

Millennials want the same access to retirement security afforded to generations before us. Pensions provide a modest monthly benefit that a retiree can count on, but Millennials are also concerned about the local impact of their dollars. A 2016 report from NIRS showed that when retirees spent their pension benefits in 2014 they generated $1.2 trillion in economic output. Despite what you may think, public pension plans generate massive revenue. According to the National Conference on Public Employee Retirement System (NCPERS) recent report, public pensions generated $137 billion in new money.

I entered the workforce in 2007 as the economic downturn was beginning. Though the economy is steadily bouncing back, the feeling of looming financial insecurity lingers for Millennials, which is why we all be very concerned for the retirement crisis we have here in America.

You may not notice it but take a look around the next time you are in a grocery store or coffee shop. Do you think that the 70-year clerk wants to be working? And do you think that any of us want to be working into our 70s?

If we want to right the course, then we need to make sure we protect pensions and that companies and governments are offering their employees a secure retirement.

Bridget Early is the Executive Director of the National Public Pension Coalition, which is based in Washington, DC.

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