Study Finds Traditional Pension More Cost Effective for States and Workers
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A new study finds that defined-benefit pension plans are not only preferred by state employees, but more cost efficient for state governments than defined-contribution plans like 401(k)s.
The report, “Decisions, Decisions: Retirement Plan Choices for Public Employees and Employers“ by the National Institute on Retirement Security (NIRS), studied seven states that offer both defined-benefit and defined-contribution plans to workers. It also looked at two states, Nebraska and West Virginia, that switched from defined-benefit plans to defined-contribution for new employees–only to switch back to traditional pensions because they were more cost efficient for the state and the workers.
Ilana Boivie, one of the study’s authors says:
Employers understand that pensions remain the most cost-effective way to fund a retirement benefit, and that switching from pensions to individual accounts can drive up costs for taxpayers. These economic facts coupled with strong employee preferences for pensions suggest that public employers are unlikely to mimic the trend away from pensions that has occurred in the private sector.
Click here for the full report.
Women Workers Less Likely to Have Secure Retirement
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Women workers are less likely than men to have enough money to retire comfortably because they generally live longer than men and earn less on the job, according to a new report. It will take a three-pronged approach to help women have a secure retirement, the report says: traditional pensions, supplemental 401(k)-type savings and Social Security.
“Shattering the Retirement Glass Ceiling: Women Need a Three-Legged Stool,” released this month by the non-profit research group National Institute on Retirement Security (NIRS), found that because of her longer life expectancy, a woman with an annual income of $50,000 would need to save $1,000 more toward retirement every year than her male counterpart to have an equal retirement experience. Yet, more than 45 years after the Equal Pay Act was signed, women in the United States still earn only 78 cents for every dollar men earn—even with similar education, skills and experience—and African American and Hispanic women earn even less. The wage difference makes saving money more difficult for many women.
