Pensions Most Economically Efficient Means to Ensure Middle Class Americans Can Remain Self-Sufficient in Retirement
JULY 12, 2011, Washington, D.C. - National Institute on Retirement Security (NIRS) executive director Diane Oakley testified today before the U.S. Senate Committee on Health, Education, Labor & Pensions that pensions provide substantial economic stimulus for virtually every state and town across America. In a preliminary analysis conducted for the hearing, NIRS estimates that 2009 expenditures from public and private sector pension plans:
· Had a total economic impact of $756 billion;
· Supported more than 5.3 million American jobs; and
· Supported more than $121.5 billion in annual federal, state, local tax revenue.
Download the full written testimony here.
(Source: National Institute on Retirement Security, Washington, D.C.)
"Pensions are a 'high five' for the U.S economy: investing $5.35 trillion in assets for the future, keeping some 5 million retired Americans out of poverty, supporting 5.3 million American jobs, and delivering retirement income at nearly 50 percent lower cost than individual defined contribution retirement accounts," said Diane Oakley, NIRS executive director.
Oakley continued, "When retirees have a stable and secure pension check, they don't stick it under the mattress. They spend that income goods and services in their local communities, leaving a substantial economic footprint from coast to coast. That regular spending is critically important today as the economy struggles to recover. In contrast, retirees without a pension may be fearful to spend given the impact of the market crash on individual retirement accounts or because they worry about outliving their savings."
"We are strongly encouraged that the Senate HELP Committee is carefully examining pension economics and policies. NIRS applauds the Committee's leadership to investigate how pensions ensure middle class Americans can be self-sufficient in retirement while simultaneously fueling the economy, providing capital to the financial markets, and reducing government expenditures," Oakley said.
Oakley testified that NIRS research finds that Americans are highly anxious about their economic security in retirement, and they want leaders in Washington to take action. Polling research indicates that Americans believe that the disappearance of pensions has made it harder to achieve the "American Dream," and more than 80 percent believe all workers should have access to a pension so they can be independent in retirement.
She also highlighted that pension income plays a critical role in reducing the risk of poverty and hardship for older Americans. Referencing The Pension Factor, Oakley reported that rate of poverty for older households in 2006 without pension income was six times greater than for households with a pension. Moreover, the billions of dollars in savings for public assistance due to pensions are significant given the fiscal pressures on government safety net programs across the country. More specifically, pension income received by nearly half of older American households in 2006 was associated with:
· 1.72 million fewer poor households and 2.97 million fewer near-poor households.
· 560,000 fewer households experiencing a food hardship.
· 380,000 fewer households experiencing a shelter hardship.
· 320,000 fewer households experiencing a health care hardship.
Oakley also testified that pensions are the most economically efficient retirement plans available. Due to their group nature, pensions can deliver the same level of retirement income as an individual 401(k) type savings account at half the cost. NIRS research indicates that it makes sense for pensions to be a centerpiece of retirement income policy and practice in light of current fiscal and economic constraints facing plan the nation.
The full testimony is available at www.nirsonline.org.
About NIRS
The National Institute on Retirement Security is a not-for-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers, and the economy through national research and education programs. Located in Washington, D.C., NIRS has a diverse membership of organizations interested in retirement security including financial services firms, retirement plan sponsors and service providers, and trade associations among others. More information is available www.nirsonline.org.
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