Should I Be Worried About My Pension?

A Primer on Funded Percentages And Other Matters.

I had dinner the other night in Pasadena with a young cousin, who is doing quite well as a digital animator for a major studio. She and her husband were pleased to introduce me to their first child. We made goofy faces and played peek-a-boo while eating pizza, as young cousin confided she’s worried about the future: Where will their son go to college? How will they pay for it? Will there be enough left over to cover their own retirement needs? Will the pension be enough?

I was surprised: I expected her to be worried about the future, but for some reason it hadn’t occurred to me that she might have a pension. Who these days has a pension? More people than you might think.

Young cousin is a member of the Animation Guild, a union that, like most unions, has negotiated pensions for its members, in this case managed under the Motion Picture Industry Pension Plan Fund. Over 90% of union workers have access to a pension, but 64% of workers outside of unions have access, too⁠ [see note 1] though that number is in decline. Many non-union pension funds are “frozen”, meaning new employees cannot join them, and even existing pension participants find their employers are no longer making contributions.

Out of more than 160 million Americans in the workforce [2], here’s roughly how many have access to a pension:

  • 11 million through single employers [3]
  • 4 million through industry (multi-employer) plans [4]
  • 4 million through federal employment [5]
  • 15 million through state and local government employment (e.g. teachers, police) [6]

In addition to the above, don’t forget that Social Security is essentially a pension plan itself, which covers just about everyone who has worked. For those who have private pensions, Social Security means they actually have two pensions, though there are some employers who reduce their company pension amounts to compensate for the fact that they made Social Security payments in your behalf.

If you have a private pension (I’m talking to you, my dear young cousin), and you are worried about the future, then you might want to take a moment to find the answers to two important questions.

1. How much does your pension promise to pay you when you retire?

Check your pension documents. Pension plans typically take an average of your salary toward the end of your career, and then pay some percentage of that. [⁠7] Often the fund will offer you an estimate based on future projections. Here’s an example:

Consider a worker who is currently 61 years old and will retire next year with a career-ending salary of $100,000 after a normal career path (started young, gradually earned pay increases, and so on). Social Security might pay around $1,600 per month, and the pension could pay another $4,000. This worker also has another $500,000 saved in a 401k, meaning an additional $1,250 might reasonably be withdrawn every month without touching the principal, under standard assumptions. Total will be $6,850 monthly, or $82,200 a year. Given that expenses typically decline in retirement, that should be enough for this worker to maintain a comparable lifestyle.

2. Will your pension actually pay you, or will it run out of money first?

Most people think a promise is a promise, but the sad fact is that there are more than a few pension funds currently in trouble. To determine the probability of your pension going bust, or paying less than the full amount you’ve been promised, start by checking on the “funded percentage” of your plan, which should be reported to you annually. That’s calculated as assets of the plan divided by what it’s supposed to pay retirees into the future. For example, if a plan holds $800 million in assets, but is expected to pay out $1 billion to retirees, then it only has 80% of what it needs. Below are a few real examples, taken from recent reports published by each fund:

Single-Employer Plan Examples⁠ [8]

  • Morgan Stanley Employees Retirement Plan — 115%
  • Seattle Art Museum — 98%
  • Sears Holdings Pension Plan — 83%
  • Board of Pensions of the Presbyterian Church USA — 150% [9]

Multi-Employer Plan Examples⁠ [10]

  • United Food and Commercial Workers International Union-Industry Pension Fund — 108%
  • Central States Pension Fund (generally, truckers) — 48%
  • The Motion Picture Industry Pension Plan Fund — 81%

That last one is the fund that handles members of the Animation Guild, my young cousin’s union. Her pension fund is reportedly underfunded by nearly 20%, which is worrisome, but not as bad as the Central States fund, which is approaching catastrophe.

What should young cousin do? She should be asking lots of questions of her union and of her plan administrator. What’s happening with her underfunded pension? Is it stable at that level? Getting worse? What is her pension plan administrator doing to solve this problem? What is her union doing about it? Are they negotiating to raise contribution levels from union members or employers? Are they planning to reduce benefits? Will they be investing the fund more aggressively in the future?

If my young cousin then determines she cannot rely on her pension, she’ll need to start saving significantly more. How much more? To save enough to compensate fully for the loss of a $4000-per-month pension, she’ll likely need to have invested at retirement about $1.6 million, which sounds like quite a sum. But with a likely 40-year career ahead of her, investing a mere $15,000 a year with an average 5% real return, bumping that amount up a bit each year for inflation, should set her comfortably onto the yellow-brick road.

Does that $15,000-a-year figure shock you? Hmm. Let’s talk about that a bit in a future article.

Of course, if young cousin’s pension fund resolves its difficulties and fulfills its promises, she’ll have so much cash she won’t know what to do with it all. I suppose she could take the money she saved outside of the pension and bequeath it to her son, which wouldn’t be a bad thing at all.

Jeff Cochrane holds a doctorate in applied and agricultural economics from the University of Wisconsin-Madison, and is also a pensioner under the Foreign Service Pension System. He is retired from the U.S. Foreign Service, having spent the bulk of his career directing economic programs of the U.S. Agency for International Development. He is not a financial advisor or certified financial planner, and nothing in this article should be construed as offering specific advice to individuals about trading securities.


1. The Bureau of Labor Statistics has information on access to pensions from their national compensation survey. On their website, navigate to subjects, pay and benefits, national compensation data, who has benefits, employee benefits survey, national compensation survey tables, employee benefits in the United States, employee benefits for private industry. I used the 2016 data.

2. Return to the very helpful Bureau of Labor Statistics. Navigate to economic releases, employment and unemployment, monthly employment situation, summary table A. Note this excludes the military population (around 1.5 million) as well as institutionalized people (e.g. prisoners). With rounding, 160 million is still about right. I used the December 2016 data.

3. This time I consulted the Pension Benefit Guarantee Corporation, which insures both single-employer and multi-employer (industry) pension funds, though with very different sets of rules for each, a topic well worth covering, but for another day. Navigate to open government, PBGC data sets, pension insurance data tables. There are two sets of tables, one for single-employer pension plans, the other for multi-employer. Start with the single-employer. Within those tables, data here are drawn from “insured plan participants”, though this is the total for all status of participant: active workers, vested workers who have moved on to something else and have not yet begun to draw their pension, and retirees. An additional table in the series provldes a percentage breakdown by status. Multiplying the percentage of active workers by total participation yields the figure provided here. The 2013 status percentage (latest provided) was multiplied by the 2014 participation (latest provided), and rounded to the nearest million.

4. As above, but jump down to the multi-employer tables.

5. The key source for Federal Government data is the Office of Personnel Management. Navigate to policy, data, federal employment reports, employment and trends, 2013 report. Total of 2.7 million is for civilian employment. This excludes military, so for that, try the Defense Manpower Data Center. Navigate to DoD data, statistics, workforce reports, current strength. Total in late 2016 was 1.3 million. Total federal workforce is thus roughly 4 million. Just to check, try a second source: the White House. Navigate to the Office of Management and Budget, budget, FY17 budget, analytical perspectives. See the section on strengthening the federal workforce for a convenient table showing total federal employment, civilian and uniformed military, though presumably the sources for this table are the others cited above. This is total employment, but generally all have access to a pension. Careful, though. With a change in the Administration, the White House website will likely be turned upside down, though the OPM website should still be accessible somewhere.

6. Navigate the website of the U.S. Census to topics, public sector, government employment and payroll, state and local combined table. Using 2015 data, there are 14.4 million full-time employees, though with part-timers, the full-time equivalent is around 16.3 million. Navigating back to public sector, government finances, annual survey of state and local public pensions, summary data table. Active membership in pensions (people working and paying into a pension fund) is 14.7 million, rounded to 15 million.

7. To see how a typical pension might be calculated, try this interesting one from Exxon. Their formula is an average of 36 months of pay (a “high three consecutive years” type formula) times a multiplier (in their case, 1.6%) times years of service. They then reduce the total to offset what they’ve paid for your Social Security. Exxon applies the offset only if you are also drawing Social Security, so if you retire before you are eligible to receive Social Security, there is no offset.

8. For most single-employer pensions, search for the required legal filing via this DOL website and click on the link for Form 5500 and Search. Enter a plan name and a publication year. Download the form. Scroll down to Schedule SB Part III line 15 if you’re inspecting a 2015 filing.

9. You won’t find listings in the PGBC database for the pensions of religious institutions, since they are apparently not covered by the same laws as others. For religious-affiliated pensions, check their financial statements and do the math. Divide total assets by “actuarially” determined liabilities. Note that you’re looking for “actuarially” determined liabilities, which are not the same as the typical liabilities you might find in an ordinary business financial statement. That’s because the liability here has to do with predicting life expectancies as well as when people might choose to retire. Actuaries are trained to do that sort of prediction. The example here has to do with the pension fund in which my mother participates. The Presbyterian Church USA pension fund (the “Board of Pensions” at appears to have $9 billion in assets versus only $6 billion in liabilities, giving it a funding ratio of 150%, a rather large surplus. Some other religious institutions seem to be in trouble. Have a look at this article for an example and a bit of background on the subject.

10. These legally required reports on industry or multi-employer pension funds are typically published on the fund website. You could search the Web with keywords being your fund name, plus “Annual Funding Notice” and then scroll down for the plan’s “Funded Percentage”.