With today’s retirement system, Americans today have greater access to workplace retirement plans than in the past, are saving proportionately more, will have more money in retirement, and have better protections in place to help guard their savings, the Empower Institute argues in a new report, The Over-Stated Retirement Crisis.
While some claim that employees were better off when defined benefit (DB) plans were the dominant retirement savings vehicle, the report notes that on a systemic level, DB plan coverage was not portable—and DB plans covered relatively few people. In 1950, 10 million Americans, or about 25 percent of private-sector workforces, had a DB plan. The percentage of workers with a DB plan increased, to about 50 percent in 1960, before dropping off again. In 1980, 38 percent of workers had DB plan coverage, and as of March 2018, 26 percent of civilian workers had access to a DB plan.
The Empower Institute notes that between 72 percent and 90 percent of pension participants did not qualify for DB plans because of strict vesting schedules. It says individual plans’ challenges included discrimination toward rank-and-file workers and occasional misuse by corporations. DB plans had positive qualities—employees with access to a DB plan had a clear retirement day with a fixed payout, and the employer, rather than the employee, assumed the burden of funding the plan. But, the report says, many of the positive aspects of DB plans are being replicated through the modernization of the current retirement system.
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