Table 9
Table 4
Chart Table 3 7
Chart Table 15
Table Table 3 1
Table 2
Median Years with Current Employer
retirement work less clear force When One answer. income incriticism 1993 considering A security were key of nearly this role the inwork that will issue as likely be if regards of 401(k) played whether to the have plans byassumed the pension wealth were nation not accumulation standard savings isallowed saving as ,of men enough comparison, workers through , compared tocovered provide homeownership. i.e., with the by foradequacy them afuture 16 percentage would e To conomi of the instead future cextent point
through of 1990, always 22.7% increases moved of boomers intopayroll establish were taxhealth over ratesage and benefits of /or40, expansion the ahead age of at any whi of c the h pension job taxable change arrangement. wage begins base--the to slow. Large portion History employers of says the deal total that on
on a smaller work force, and on the use of lun_p-sun_ buyouts and pension incentives to achieve that st'nailer
Primary Defined Benefit and Defined Contribution Plan and Active Participant Trends
Retirement Prim Inclusion e Benefit Age of Male Payments Pension Job Tenure Plans from Trends, inPrivate Personal by andWorker SPublic avings ASources,
Personal PensiSavings on Assets Privat as e a over P Percentage ension Time, Plans Selof ecte Disposable and d Ye Participants ars 194 Income, 6 to Prese 1950-1992 nt
Trends in Pension Coverage, Participation, and Vesting Among Civilian Workers
retirees' that have gro average wboorner_ th, a defined finances this the measure older are benefit was wgroup illing judged must plan. to will alfio tap by Thi,s atill in take compari.son W a,s,sumption hold into thisthroe rc_0urcc c0nin sidcrati0n more i,_ real incorr_.'ct; to tcrm_ j0bs, fund nc_ to The their many ,ativc prcviou._ legitimate retirement, 5 likely aria'c gcncrati0n_, 5 would qucsti0n bythey individual% haw' would arise5 Thi_ I_0_nlpl0yillellt-bilaccl may appear 0f private whether bc at c_pccially entities this this early ,and plall
5 compensation b0rtfall work in f0rc¢ 1972.14 ,package WithWflexibility oavailable men werc(_mt e for nopenF t'_as aJ] w likely n cadc(_ntributicmb gelec to t() {ed aDe psparti >V ,ch(H0t_y ear$ cipants and t g_7-t (_f >avii)g> gg but lifctimt O were wt_uld ' cas 'nlpl(_yn_c likely be' rc'ducc'd to 'be r_t_ vested with ,'vcn though awhen likely few they l)cgativc in
increasingly in term5 of total compc_sati0n and employee flexibility, which may result in lower pension
Aged 16 and Over, 19"79, 1983, 1988, 1993
Age and Sex 1951 1963 1966 1973 1978 1983 1987 1991
Included in Personal Savings? T-94
Primary Plans Active Participants (thousands)
atall. important stage effect to on Therefore be both ininapretty individual ,society the} good , that cannot and shape. is apension cc be ustomed worse In addition, savings. off to because anda expects key of role these increased willdevel be o played pments. standards by individual of Whether living over thev savings, time. are utilizing particularly In this sense, these
participated. average governments this nation will increase ashave well had as as assets the lifetime boomers noted employnlent above. age, i.e. The 1975 , whether--due with first 1983 one step firm, toward 1986to and changes 1987 increasing a significant 1988 in the the 1989 number economy--they national1990 move savingstowill numbers, other continue were the
Summary
I See EBRllssue Brief no.129; Bosworth and Ilurtless, "Eftect of Tax 14etorm on Labor Supply, hwestments, and Savings," Journal of E.conomic
savings by individual choice, but with implications for savings.
18
Introduction Total
Perspectives (Winter 1992); Congressional Budget Single Office, Employer "Assessing the Decline in the Naticmal Savings Single Rate," Employer April 1993; and Bosworth,
mobility critics plans throughin argue employment-based such of early that a manner adequa years. cyas If it to ofsavings does maximize retirement , it plans could their incsuch ome incpotential rease as should 401 the(k)s. ismotivation be a judged separate Also, Percentag fby iscal to questi asave ecpolicy omparison o P n. eon rcentage the decisions one of Percentage living hand made , standards and Pby e,rcentage on the the federal inPercentage other,
that deemed The Census desirable, documents would balancing that more of workers the federal are inbudget. professional Until services that step and is retail taken, jobs, all Americans fewer are in may be
What Both the Sex federal es government 3.4 4 does .6 with 4. both 2 Social 3.9Security 3.6 and Medicare 4.4 benefit 4.2 levels and 4.5 financing
employment after leaving their "career" job. 17
9.0% Private Pension Plans Net Net _'=_= -- "=_i Net Net
• What will individuals do with lump-stml distributions? Over $400 billion was paid in distributions
Source of Benefit a 1987 1988 1989 1990 1987-1990
Covered Partici- of of of Covered of of Partici-
Burtless and Sabelhaus, "The Decline in Saving: Evidence from I leasehold Surveys," Brookings Papers on Economic Activity, 199l.
(thousands)
government getting make retirement itaSuch more regular with will plans 14-17 difficult. living impact mes_tge do standards involve On boonlets that their 0.7going explicit 30th enjoyed by in affecting birthday 0 decision .debt 7 while ,totheir live over making still 0.6 better disposable working, 40%onof today 0the .7 the bor part income young is maybe deemed ofa individuals. had today even appropriate held a and a comparison their thus They jobs their as0.5 must a for of bmatter ability two the decide retired years a of to public save, whether or toless as ,
manufacturing. will have a directProfessional impact on service both theand ability retailofworkers employers bothand experienced individuals pension to engage growth in retirement since 1988. savings Twenty- and
• • Large Advance organizations funded pension are seeking andDefined retirement to change benefit plans employ'ee savings change programs bene change fit programs have accumulated into a form over wherefive expense change trillionis dollars more change in
Defined Defined Multi Defined Defined Multi-
2 Kantor and Madden, "Funding U.S. Retirement Workers Workers Benetits: A pan 100tYea s r Perspective," Entitled Work May ers lq94.Workers Workers Workers pants
8o.................................... ;,i...... __: .........................
between 1987 18-19 and 1990. 0.6 A total of 0.5 $219.6 billi 0.5 on was rolled 0.6 over ainto a rollover a IRA, 0.5 leaving $180.4 a billion
well as benefits they will receive in retirement through Social Security and Medicare. It is important to
to those policy. Active participate c Participants urrently in working. ..................................... the plan 1985 , how A retiree much 1989 employer may to cont have 1990 r contributions ibute higher , 1985how 1990 realthe 1989-1990 incom ,_1___ funds e in Yes should retirement 1985 be inves / than t 1989 ed his within 1990 parents choices 1985-1990 but offered still 1989-1990 have bya
four on the percent amountof private-sector of savings they pension will need participants to maintain are now a targeted in service lifestyle jobs, t,p in retiren)ent. from 195{ m 1988. Manufacturing
withsavings. about I amone-quarter Pension pleased to savings holding appear are before jobs a primary more you than this form mornin sixof years. personal g to 40review The savings low issues savings in the related economy. and to voluntary saving Pensions s, pension economic represented security, 50%
predictable. The Total federal Plansgovernment mav 311become 603 the 718 only entity 733 ($that billions) 730 promises 731 benefits 712 with the
(millions) (millions) (millions) (millions) Covered Participating Participating Entitled Entitled
End of Benefit Contribution employer Total Benefit Contribution employer
3 Bernheim, "The Adequacy of Saving for Retirement: Are the Baby Boomers on Track?," presented a t EHRI policy forum, Retirement in the
20-24 1.3 1.1 1.0 1.3 a a 1.6 a
taken into income or directly transferred investment income to a new employer's Partially plan. The most recent data available indicate
realize lower standard that many of of living the than thingswhen that he will was impact working. the boomers' Would his retir retirement ement, such income as economic be considered growth, in some economic sense
the sponsor America , and whether is not a nation to roll over of individual lump-sum savers. distributions This fact received led to creation from suchofplans the Social on jobSecurity change. program, Poor
now employs 33% of allDefined private benefit pension a participants. 103 175 173 163 146 132 113
and participation of the personal long-term rates savings of growth the tx,young tween of the1976 may elderly well and population; 198(7 be explained ;5c_':;between the byvarious decisions 1981 and Federal to1985 change ;programs and,jobs 5t % frequently. and between policies 1986 At that the andolder impact 1990.endthe
21st presumption Century: Ready that or Not?, it will Washingtcm, always DC, be May there. 4. 1994; Between and commentary 1950 and by Joyce 1980 Manchester. this presumption was part of the benefit
16-24 a a a a 0.7 1.1 a 1.2
All Civilian Workers Defined Benefitt Plans
interest, dividends, rent,
Work Force Private Patterns Pensions Defined Andcontribution Pensions 208 $120.8 428 $124.1 545 570 $133.6 584 599$141.2 599 519.7
developments involving housing market trends, and government fiscal, savings and retirement policy, will
inadequate? the decisions employment-based that more ,,,,,ill The weaken individuals answer retirement pension to arethis saving system question income ($ lump , billions) and may security. sums programs ver for y However welt retirement--27 such have ,as individual it diffe '.;i is rimportant entin answe 1087 retirement rs to 1993 , realize depending (percentage) versus accounts. that 7% employees on prior These whethe toprograms r 1980--and can it is often
The baby boom is now aging, with the effect of moving more workers into ages where available research
of elderly; 4 See the EBRI age and Issue spectrum the Briefdegree no. 129. it isto worth whichconsidering income security that inis19 affected 79, 26.3';bv ' had private left their pensions. career Ijob askby that 50;the 38.9% full by text 55; of58.2% my
programs 25-34 of most large organizations. 2.6 3.0 Large 2.7 organizations' 2.8 recognition 2.6 that 3.3they had 3.4 to innovate 3.5 and
1979 95 and 53royalties 44 (imputed) 23 Yes 56% 46% 81% 24% 52%
_E 12 " 25 34 Years
Federal Employee DefinedRetirement contribution b as 44.9 48.1 506 53.9 197 5
answered receive unfold over a higher from a period abenefit personal of decades from financial defined yet plam_ing tocontributi come and perspective on areplans difficult than or from tothey predict. a would public from policycomparable perspective. defined benefit
seek to create 35-44 a level of deferred 3.2 consumption. 6.0 Since 6.0 1986 we 5.2 have seen 5.0 a decline 5.8 in the traditional 6.1 measure 6.0 of
5 indicates submission Board of Trustees higher 1985 be, included 1994 job Annual stability $ 648 in Report the , higher record $ of the 385 Ih;of ard pension the of Trus hearing. t$123 eeparticipation s of the Federal ,$1,157 Oldand -Age, higher Survir.,_rsgeneral Insu 561% rance savings. and Di 33.3% sability For Insurance example 10.6% Trus ,t t-u when nd
•2-9 Some fewer 1983 estimates are spendingindicate 88,124 them that 23% 59,966 99to in maintain 1987 45,796 52 1993living -42,328 versus 43 standa 50% 24 14.170 rds prior in to 52retirement--without 1980353 but 43there 246is still 83 189 aselling great -164 24 deal one'sof home-- money -57 57
by 60 reinvent ; and 70.6% to survive by age has 62.contributed 41 New data capital to new to gains assess pension whether forms this withhas more Nochanged built-in significantly cost control, will expansion allow new of lump-
g_
State and Local Employee Retirement 31.2 34.1 36.6 39.2 141 1
percentage of total 67% 71% 76% 78% 80% 82% 84%
(Washington, DC: U.S. Government Printing Office, 1q94); and Et_RI Notes, June 1994.
45-54 6.3 9.0 8.8 8.6 8.3 10.3 9.6 10.0
plans, assuming Given 1990 thei::i the heterogeneity same.... 848investment :::, of 651 .......... , tile-...,. income, baby boom 225 particularly :--A ,__ generation, : 1,723 if/- the,,.' /more V- ..... are--_, young research .... 49.2 / and----_ is mobile. needed 37.8 to............ It, has identify :A been 13.0 specifically documented
personal 10-241988It asavings is also important (chart 24,267 1). During to note, •17,791 114 this as 2q the same 15,624 62CBQ period report 47 -8.643 , hodiscusses wever 322.167 , ,netthat 55 housing the 369 relatively wealth 42 271increased optimistic 76244 (chart scenario -125 28 2), asfor did 68 27
offered a My 401(k) nameplan is Dallas in 1993Salisbury. , 48% of benefit private-sector I am payments presidentworkers of the under Employee Noage ua 30 Benefit electedResearch participation Institute compared (EBR1), with a
savings would assessments. A great require dealpension has been savings written toand be closer said in to recent twelve years trillion aboutdollars trenlendous today. changes Studies infind the that nature boome of rs are
o sum 10 payments instead of anmfities, reduced retiree medical promises, expanded worker contribution _ 35 44 Years benefit
55-64 8.0 11.8 13.0 11.9 11.0 13.6 12.7 12.4
7.0 ................... "_[___ [_. "" _- "'V- --"=........._="= ...... ......[[Y[ ._=• _ ............ ............
6See 25-49 Congressional not 1988being b 1991oo preserved Budget 1,032 Office, 14,178 forret_rement. -----v--_-::::::::::::::::::::: Baby th 9,736 114 x_ 834 mers in _ Re 8,605 65 ti This remen 267 t:is 49 nota -5,573 An Early judgmental Per 2,133 38 spec 1.131 tive (\'Vashington statement 57................ 491 , 48.4 , DC: 43 butCBOe, 340 the 39 numbers .[993); 175, 304 and CBO make 12.5 187 34 Tesclear timony. that 736 7
Defined contribution plans
boomers which that workers subgroups relative withto within accrued their parents' thepension generation generation benefits are currently (i.e. is dependent , thoseatinrisk final on and future average what economic the defined sizegrowth, ot benefit tile problem more plans)specifically can is likely experience to onbe the for
pension wealth Subtotal (table 1). The Social Security program 196 9 and 206.3 federal pension 220 8 plans have 2343 built assets 858.3 m the form
72 nonprofit, % of workers nonpartisan, over agepublic 30. The policy overall research 401 (k)organization participation located rate(miltions) among here those in Washington, offered a plan DC. grew from 60% in
employment. saving one-third One reads of what constantly would about be needed a moreif job-mobile we do not count society.housing The higher wealth mobility , but over hypothesis 80% if we is used do. The to
options, enhanced comnlunications programs, and a common emphasis on individual responsibility.
Statement of Robe 65 rt and D. Reischauer, over 10.0+ Director, CBO 13.8 , before the13.7 Subcommittee12.6on Social 11.0 Security, Committee 13.2 on Ways 12.4 and Means, 11.1 U.S. House
1992 1,065 948 tndividual contributions 288 2,300 Yesb 463 41.2 12.5
50-99 N 1993 8 11,303 9,013 118 8,346 67 51 -2,957 44 -667 57 808 44 - 645 76599 " -209 38 45 54 Years -46 86
them. assumption how This much involves that iswages preserved moving ,,*,,illgrow will beyond make faste broad r athan significant sweeping prices ove difference generalizations r the next for2both (1 to rega 4present 0rding years. the savings Long-term boome and rs. economic retirement Groups that grsavings. owth would
of 1988 Treasury to 67% securities in 1993.15 , but the "surplus" has been spent on other programs, leading to a net deficit for the federal
Conclusion pension of Representatives, issues EBRI losses of what isifcommitted September they we change count, 21,to 1993. what jobs accurate prior we assume analysis to retirement. about of employee future 19 Participants economic benefit and growth, in defined economic andcont what security ribution we issues. assume plans Through about do not inflation our
argue >- for defined contribution plans, portability, lump-sum distributions, and preservation. Based on Census
Large organizations are beginning a move from paternalism to testing concepts of partnership, shared
1993 1,135 1,062 308 2.505 453 42 4 12.3
100-249 9,534 7,109 employer 6,563 contributions -2,971 -546 Yes 1,498 1,135 1,040 -458 -95
ERISA Work Force
Social Security Total Participants Old-Age and Survivors 45 69 77 78 78 76 77
..... ....................................... ::\:::::::::
now may appear be retarded to beby at risk low to savings some and degree investment include nonhomeowne and by gover rs, nmenttilefiscal less educated, policy. tile single, and tile youngest
government. 7 Lewin-VHl, Inc., Males The AgingSocial Baby Boom Security ers: 3.9 I,Ic_program wSecur5.7 e l,> Thwhen eir Ic_no 4.2 considered mi,. Il_ture?4.6 with Disabilit 4.5 y, and 5.1 Medicare, 5.0 will move 5.1 to a point
experience research, _ in 6such we the areas strive same as to health losses contribute just care,byare tochanging ........................................ the at the formulation center iobs. of Defined apparent of effective contribution contradictions and responsible plan participants in the health, resultswelfare, may of different haveand theretirement studies of
data 250-499 This from Changes is1963 the case toin19 the for 79, 4,670 law those an article (five-year leaving 4,022 written vesting) private 3,647 in 19,q2 plans and noted 1,023 work as well job force patterns as375 patterns those that lea\'ing combined 1,651 moreFederal readily 1,430 to move and support 1,293 other the number a public hy'pothesis 358 of vested 137that
responsibility, and increased individual investment responsibility. income Small organizations Partially have historically been at this
Insurance Defined Benefit benefit Payments b c 33 $183 6 40 $195 40 5 40 $2080 41 40$2230 39 8101
:6 1988 b 53 36 30 22 68 56 83 _ 4255 64 Years 75
boomers.
(Washington. DC: American Association of Retired Persons, 19q4).
14-17 0.8 0.7 0.6 0.6 b a a 0.5 b a
A 93Q2 study by Lewin-VHl 1,111 for 1,007 the American 297 Association 2,415 of Retired Persons 460 reaches 41.7 essentially 12.3 the same
500-999 3,149 2,701 interest, 2,463 dividends,-686 rent, -238 2,222 1,910 1,751 -471 -159
policies. where our the society benefits retirement Consistent has exceed been income job-mobile with newour prospects taxmission, revenue for decades: of baby we within doboomers. not 15 lobby years. 5 or The advocate trends particular and data noted policy above solutions. do suggest, however,
opportunity pension end of the participants, spectrum. to save more The that Defined for Federal is, those retirement contribution gove with rnment a than n(mforfeitable 12 they took would the 29 first benefit, in37 step a comparable in to 38 this 86';'direction of 37defined all participants, 36 asbenefit an employe 38 plan; from r however in 771984 (7_,inwith 1988 they
employment. 1993 Pension savings 58would 39 be much 32larger today 27 had 67 individuals 56 never received 83 lump-sunl 48 86
A consensus ,0_L:::::::::::::::: exists in America............................................... that we do not save enough as a nation. A review of __::- the income /of'-the -'
8 Ibid. • m
4 18-19 0.6 0.5 0.5 0.6 a a 0.5 a
1,000-2,499 93Q3 1,134 2,360 1.052 2,220 2,090 307 -270 2,493 -130 3,636 45.5 3,434 42.23,221 -415 12.3 -213
and royalties (imputed) Yes
and conclusions 52% in 1979. as the CBO and Easterlin, et al., noting that most baby boomers should have higher income in
The issues Total the committee Defined contribution raises as today $380.5 are of extraordinary $401 8 importance. $4288 America $457 3 is not 1,668 a .nation 4 of
that need savings to recognize available their to opportunity individuals for will retirement continue planning to grow through and makethe decisions pension to system. maximize their retirement
the introduction of the Federal Thrift Savings Plan and a significanth, reduced value defined benefit pension
elderly today 20-24 indicates a population 1.2 that 1.1 is doing1.0well relative 1.2 to prior a generations. a A review 1.7 also asuggests
Private distributions Wage 9304 4.o and ! Salary but I I only 1,135 I I Irelievers I I ', 1,062 I while I I , ,they I 308 I were I I Istill I I2.505 working I I I I and I I annuity I I 453 I I payments I I ',42I 4 I once I ', Ithey ', 123 I retired. I
2,500-4,999 847 833 capital 798 gains -49 35 No 2,930 2,940 2,802 -128 138
What 9See Auerbach Shou and ld Kotlikoff, One The Sav Unit e? ed States" I-Goal and Saving Cri_e_ and Their Implications h_r the Baby Boom (.eneration, Report to iVlerrill
Statement
retirement than today's elderly, percentagewhile of total stressing 26%that 42% not all 48% will benefit 49% uniformly: 48% 48% "Large 50% numbers will face a
savers. income • CBO , The In such concludes times first as preserving past issuethat one for most had policymakers hln_p-sum tobaby save boomers distributions foriseach to determine purchase are received likely , their but toon enjoy not respective job today. change. higherThe goals. real primary F incomes irst, should emphasis in retirement we we focus seeon today than their is
plan. 2 The typical worker is currently cm a job which will last about eight years in all, counting the
940116-24 1,086 a 1,022 a 298 a 2,406 a 0.7 45 1 1.1 425 a 12.41.4
5,000-9,999 1979 455 71 450 38434 30 -21 14 -16 54 3,141 43 3,153 79 3,015 -126 20 -138 47
that Lynchthe & Co., retired Inc., February would be lq94; doing and Merrill better benefit Lynch had ,payments Sthey aving saved the Americ more, an Dream and, : AnNo that t!b corlmost onlic and would l_ut,lic Opinion have had Study to (Princeton save ,more NJ: to Merrill
Total 1000% 1000% 100.0% 100 0% 1000%
• A recent study for AARP projects that between 815{ and 84'7, of baby boomers will have pension income
retirement of economic risk and deprivation because of a history of low earnings, intermittent employment, poor
25-34 2.8 3.5 2.7 3.2 2.7 3.4 3.7 3.7
absolute on 10,000-19,999 Lynch consumption parents, , Pierce, Among raceme as Fenner suming workers and levels & credit; Smith, such that covered 198 Inc, on ras eal consumer 1994). two wages by 213 tirnes both continue confidence the defined 223 poverty tobenefit g and row, 25 rate what , and Social on it replacement defined 10 will Secu mean rity contribution 2,749 and for of consun-_ption final private 2,956 income, plans pen ,3,134 sions 60% and or some economic indicated remain 385 cornbination. intact, growth. that178 the and
1983 Cong yearsress it has hasalreadv been moving lasted.74 so An cialimportant 37 programs29mind}rite in this 15 direction about 4928 since <;,'--are 1983 40currently as it has 80taken employed actions 20in that will 50
Pension Participation Over a Lifetime
maintain the income levels they had prior to retirement.
Active Participants 31 39 41 42 42 43 42
during 0 retirement. 35-44 I The projection 4.5 I Public Pension 7 is .6Ibased Planson 6.0 two I crucial 6.7 assumptions: I 6.9 I first 7.7 , that nearly 7.6 all lump-sum 7.2
education, 20,000+1988 adiscrimination, 175 and an 86 inability 178 44161 to adjust 32 to14 changing 21 17 employer 51 8.985 requirements, 37 8.792 72 8,711 among oth -274 24 er -81 65
As more At recent what years age one havebegins spawned to save advertisin makesg a great aimeddeal at older of difference. Americans,Anthe individual emphasis _'_ving has still 3% been of salary on on a
defined The 10Seehealth Disney Venticontribution near and care Chairman lifetime Wise, expenditures "The , plan jobs Wealth forlasting was example of do Cohorts: the not 20 ,most \,ears outweigh does Retiremer_t important not or more, "need" other Saving inand gains. 70 1903. and ';;1 :the 7' replacement _: This CBO Changing in jobs may notes which AssetsotOIder well the to meet prove prospects will last "The to Ame be 30 rAmerican a icans," r true years e not for NIGER or asmost more. Dream." sanguine Working of An them Secortd PaperNo. fo,r some as ,
result in full Social Security benefits being paid at later ages, a decrease in early retirement benefits, more of
(percentage of total)
Primary plan is defined
A review of available evidence indicates that on a total wealth basis, and a pension savings basis,
45-54 7.6 11.4 8.8 11.5 11.0 13.4 12.3 12.2
va None riables." or1988 none b 7 reported 10,280 18,485 86 Defined benefit 18.139 47 plans347.859 25 346 55 39 72 - 29- 73- 26
4600 (Cambridge, MA: National Bureau at Economic Research, 1c_c)3)
1951 1963 1966 1973 1978 1983 1987 1991
pre-taxbasis, obtaininga benefit tax deterred investment 27 return 30 exceeding 29 28inflation 28 bv 2 27 '_, would 26 be able to purchase
the consumption. the should historical benefits demographic our equally focus being turnover As inlportant be individuals groups subjected different rates as minority discussed others, to for and income what governments are in the elsewhere particular at taxes, government workand have inin for what the this saved the views availability will testimony single, less turn as and athe must out of cause spent less %_cia] tofor be educated more, the programs very Security defined an ,brief increasing and such Administration iobs--about contribution non-homeowners. as SSI proportion and 23 plan Annual part Report of the of the system. Board of Trustees of the
boomers in retirement is projected to be just under that of current retirees. The authors m_te that when medical
savings through Social Security, employer pensions, and possibly, mandatory salary reduction.
the all assets, center Policymakers including of apparent the should contradictions incomenot benefits be too in that tile fixated results could by of come relatively different from low selling studies pensiaoof n home? the participation baby Theboomers' answer ratesmakes retirement amonga very very income big young
The present approach to counting savings does not fully account for the contribution of these programs.
1971-1975 225.0 70 1 104 8 1975 16.6 15.0 1.8
10,000-19,999 Source: (For years 341951, defined 1963, for 59 1966, Security contribution 1973, 44 and and plans 1978) because 10 Lop,g-Term Employee that -15would Benefit G create rResearch owth 460 double Institute 788 compilation; 626 U.S 166 . 162
20 • SeeThere Yakoboski is a and significant Silverman, gap torthconung between in endn¢_te individual _ I_ expectations for empl_Tcr provided retiree medical benefits
number of Federal vested Old-Age pension and Surwvors participants, Insurance and that Disability is, those Insurance with Trusta Funds nonforfeitable (Washington DC: benefit, U S to 86% of all
beginning Nonagricultural at anWage earlyand age Salary and preserve distributions at each job change. Third, the individual should seek
transfe • Given rs While are theexcluded, high the number turnover onlyofthe for private oldest 42<;_employm of boomers workers, e_t-based will onehave might pension a level have of plans anticipated consumption and plan a higher in participants retirement savings has exceeding ratebeen to that of
difference. The The demog answer raphic, foreconomic, the individual work may force also and be workplace very different changesfrom now thetaking concern place of combine public policy. to require
prospects. workers1976-1980 when Department focusingof on 469.6 Labor, future Bureau retirement of 158 Labor 2 Statistics, income 196 Monthly 6prospects. Labor Review: Many1980 nonparticipating September 1952, 18.2 October younger 1963, 14.5workers January will 2.5 move
Capital 20,000+ gains and investment 29 earnings counting 36 are in the not 27 National counted, Income 2andand public Product -9 defined Accou 1nts 100 benefit of the1.329 plan pension 1,151 contributions 51 178are
21 See EBRI Issue Government Brief no. 146. Printing Office, 1991)
1979 85 52 42 21 61 50 81 25 51
employment participants,at an from organization 77% in 1988 that and offers 52% some in 1979. ty'pe of retirement plan, with the ideal being both defined
accommodate transitions. This did not and has not developed. The 28';_ in jobs of 20 years or more are most
p increasing, savings r None evious or 1981-1985 none now, retirees p 1967, reported rmore oportionately December tothan the 1,087.6 13,082 extent ever. 197fewer 4, and expe 38,839 contributions December care ted 346 defined 7with 40473 1979 and economic investment benefit (Washington, 398 27.391 1 plans growth. income DC: 1,634 and U.S. thatHowever, defined are Government 1985 reported benefit itduring Printing is not 25.6 plan Office, clear, participants. given 1952, 16 1 1963, the importance It is 4.1 often of
Mandated public action Social Security, food stamps, SSI has provided an income base. The Federal
also into covered excluded employment (table 7). Private and participate pension capital in an gains employment-based and investment retirement earnings accounted plan as they forprogress net additions throughto
and There what is will also actualh, a necessity be provided.- to look carefully Wercindividualstobecomc at differences within the more population. aware of The what baby they boomers will need will to
alncludes only employment based retirement benefits
22 See EBRI 1983Quarterly Pension Investment I?ep 88_rt, l:_n_rth 50 Quarter 41 /q93. 22 56 46 82 25 55
Chart 4
Total 1986-1990 1967, 1974, 346,014 and 1,629.2 1979); (for 579.285 1987, 636 unpublished 495,092 1 736.6 data 149.078 from by U-84.193 .S. Department 199011.420 of Labor, Bureau 16,647 286 of Labor 16,25014.6 Statistics, 4,830 6.0 397
benefit and defined contributi(m. theFourth, period that tile they older occur the individual is when he makes what he hopes will be the
likely to be affected by the retirement incentives, buvouts, and downsizing about which we read so much.
medical argued that expenditu suchres trendsto jeopardize the well-being retirement of the elderly,, income that security such because transfersdefined should contribution be excluded plans, from which consumption
blncludes civilian and military employees
plan government their assets working of has $1.062 years. then trillion acted as ove an r employer the past ten to augment years. Publi savings c planwith contributions both definedtotaled benefit$524 andbillion definedduring the
be as diverse 1988 a in economic and social 102 character 60 in retirement 45 30 as they 59 are today. 44There cannot 75 be enough 29 67
23 EBRI provide Issue Brief forforthco themselves cning, ,"Analysis it could of the serve It)q3 to Amendn increase wi_ts the to Section saving 4(11(incentive. a')(17) Most of the studies reviewed above
1991 2,055.5 678.1 859 7 1991 279 14.9 7.2
Division of Labor Force Statistics; blndividual(for contributions years 1983 to and prw 1991) ate defined Bureaucontribution of Labor Statistics plans are News Release, Employee
Prime Age Female Job Tenure Trends, by Worker A
• There is no evidence, however, of a universal employer "shift" from defined benefit to defined contribution
last job changeClncludes the more payments advantageot,s to retired workers it will andbe their to wives, participate husbands,ina and defined children benefit plan.
when typically Will making 1988 workers involve b suchexplicit assume projections. work sucherpatterns O 102 deci nce sion adjustments are 63 making, permanent 47 are aremade replacing and 36 save in prospective defined retire? 62 Available benefit government 46 plans. data 75 fiscal indicate Therepoli iscthat concern y, 35 i.e., continuing tax as76 to
contribution plans for its employees, and has encouraged other employers to do the same. Public policy has been
emphasis 24 See EBRI Issue on the Briefdifference no. 132 and EBRI that /Gallup future Reports econonlic _(;-40growth--includi_g and #(; 42 real wage growth--will make in the
period 1992 1987 to 1991, most 2,1447 of vehich was 694 7defined 9692 benefit plans and thus 1992 not included 273 in savings. 14722 6.6
Source: Employee TenureBenefit and Occupational Research Institute Mobility included tabulations ininthe personal Earlyof 1990"s 1985. savings 1989. USDL to the and 92-386 extent 1990(Washington, that Form they 5500 areannual DC: U.S. reports Department filed withofthe Labor, Internal Revenue
assume limited change in the area of health cost for the individual in assessing the future, an assumption
plans. Of the net decrease in the number of defined benefit plans, 75 percent involved plans consisting of
1993 106 66 50 43 62 47 76 40 86
12
increases 25 whether See enchlote wo and rkers #1t4r.ansfer are typically payment m reductions, a position totocounter make Chart wise what 2 decisions the authors withseeregard as the to long-term their participation unsustamability in suchof
Service. Dallas L. Salisbury, Presiden t
ultimate to prto ovide 1993 work accuracy aJune after floo26, r one's of of 1992). income projections 2,336.5 longestwith , career on high nJa the job replacement importance ends 1was 065 2the at of low future rule income prior ratestolevels of 1993 19 inflation 79,(over and it in 100 27 likely general, 5 % fostill r the and is. 143 lowest 34 on health income), 7 care 0 and
A combination of factors included raise questi in wage ons and about salary the disbursements future, _role in o employers' f pensions in savings and retirement
Pension Plan Design Is Changing
that appears unrealistic.
two to nine active participants. Large employers generally continue to sponsor both types of plans, while
All Males aData not available.
P plans. ension Coverage and the Changing Work Force
current fiscal policy, the prospectsreports for for theunemployment financial security ir'lsuranceof Virtually the baby, all states boomrequire generation's retirement dim, i.e.,
26 • Lewin The -VH notion l, Inc.Per , that, Aging Household until I?aby Ihrecently, _mer Value > I1_:_; of workers Secl_, Owner I.-Occupied Th, could _ Iin_,,assume _._:,, Housing, t ut_, early ;_ (\Va._h 1960-1 attachment in,aton, 992 F)k-: (in to ,\m, 1992 ,a rican lifetime Constant A_,.ociation job Dollars) is of not Retired supportable Persons,
low income. costs replacement in particular. for those with middle and higher income (27';' from Social Security for an individual earning
Employee Benefi t Research Ins titute
1994). r1979 edesigning bThe data defined represent benefit individuals plans. 56 agedThere 33 16 to 17 is. reason 29 to 16 believe, 59 howe\'er, 51 that a shift87is in the offing. 28 55
employers to report employee contributions
their level The of total consumption number of m private retirementtax-qualified is reduced employment-based through increased taxes plans and (bothdec prima reased ry transfe and supplemental) rs. Such fiscal
$60,600 by the Concern in 199 numbers. 4), over leaving sav As ing the Halladequacy, rest stated: to employers "At combined no ageand iswith the individuals. an probability aging population, All very arehigh therefore has of begun a given saving tojob produce enough becoming ato new su arvive; lifetime fOCUSOil
It seems that America has a tendency to make Table public 6 policy based upon the practices of the largest
• What 1983 will government policy 56 be toward 30 pensions 26 and 16 what actions 54 will 47 that policy 88bring? Action 28 taken 60 in
27 Goodfellow Source: 8o Employee and Schieber, Benefit"The Research Role ofInstitute, Tax Expenditures Quarterly Pens in the ion Provision Investment of Retirement Report. 1stIncome QuarterSectlrity," 1994 (Washington, in EBRI, Pen DC: sionsEmployee in a Changing
more adjustments Socialthan The Security doubled American would as from have an economy 311,000 aIncome relatively and in 1975, Source work greater when force negative the have Employee continued impact on Retirement to younger change baby Income along boomers. trend Security lines Act in evidence (ERISA) became since the
saving many are andnot financial saving planning. enough to maintain More financial their final planning vears columnists income into have retirement. appeared Most in newspapers. will want to More do more
job. "35 More and more workers have historicalh.' found good job matchesbvtheirlatethirties. After age
employers 1988 a , and to attribute, or desire 63 , the 35 characteristics 28 20 of those who 55 work 45 for the largest 81 organizations 31 for 70
Lump-Sum Total Distributions from Tax Qualified Plans, 1987-1990
Economy Benefit, Research 1994. Institute, June 1994): tables 3. 20. and 26
• Pension plans now provide income to 3()'_ of those aged 55 and older; 37'::_of those aged 65 and older; and,
the 1993 budget act to reduce allowable contributi_ms to pension plans will reduce projected pension benefits
than survive and will have to save more to do so.
1960s. effective,These Another to 71 changes 2,0(X) study in are 1990 focused beginning (table on 3). thetoThe effe show cts total of in number personal pension of coverage, targ private eted retirement defined participation benefit accounts andplans benefit lIRAs, increased entitlement 4()l(k)s, from andas 103,000 well
magazines 1988 b have developed with 63 a financial 36 planning 29 focus. 23 More 58 television 46 financial networks 80 and 36 shows 78
the rest of the work force. For purposes of savings and retirement planning the history of small organizations is
40, 7o about 40% in any given age group could expect to remain in that job h_r 20 years or more. 36 This does rai_'
28 See EBRI, Pension Funding 4; Taxation, hnl;licata._> h_r T_na_rr_:,', I_q-!.
9 " 25 34 Years
")3
50% of new retirees. During 199/), pensionWashington, plans provided D.C. $234.3 billion to retirees in annuity payments, and
Table 8 Total
in 1975 1993to 175,000 in 1983, then decreased 64 36 to 113,000 30 in 1990. 28 The total 56 number 45of private 81defined contribution 39 86
(table Keoghs) have appeared. 2).Social on 12 the Among Security financial Moreallattention is private-sector status also an of toimportant recent encouragement wage retiree component and s and salary of on retirement worke persons of what rs, apprt_aching individuals savings for example, and view financial retirement. pension as part planning pa 10 rof ticipation Based theirbysavings on financial has a been for
quite 29 Seethe EBRI different question A /(]allup study from by Report of whether the that #(]-5 Cong ofI, rlarge this and essional I!number I?organizations. RI IssuBud e I?r isie, e( now et noOffice Ion 5(). the (CBO) decline, 6 compares but theretheis income not vet and data wealth to showofit. the Since baby1979,
for some by over 30'){, resulting in lower contributions to plans ;rod smaller asset accumulations. _ Senate
8in 1990 $125.8 billion in the form of lunlp-sum 1987 distributions 1988 was 1989 paid from 1990 all tax qualified 1987-1990 programs.
plans60 increased from 2(}8,000 to 599,000 Monthly between Social Security 1975 and Retirement 1990. TheBenefits number _ Under of active participants in primary
periods All Females of disability and retirement. The program paid $34 billion to the disabled and $264 billion to the
services comparison steady since organizations of 197 age 2 atcoho , between runions, ts across 48% andtime, (19 employers 72,itlC)83, concluded 1988) have begun that and 50% the torappear eal (1979, personal , 19ct3). including financial This both climbs assets print toof 56% and younger television of all full-time cohorts
30 Board of Trustees, 1994 Annual Report _f the I?c)ard_( Tru.tee> offthe ()tl Axe, 5!_r_,'lr,_,r.and L)i._sbiiit_ ln.urance Trust Iund (Washington, DC:
boome • Small rs with organizations that of their have parents' not been generations able to afford at similar and points frequently in their do not liveswant--to to asses be how paternalistic. well today's That is,
however, female job tenure has been on the increase as labor torce participation has risen (nearly 75