How Defined Benefit Pensions Support Retirement Security

Research from the National Institute on Retirement Security (NIRS) suggests seniors with defined-benefit pension income fare better than seniors without such income.

The Institute found seniors with a pension are less likely to be considered “poor or near poor,” and are less likely to suffer material hardships or rely on public assistance than those with income from other sources. The study was based on data from the 1996, 2001 and 2004 panels of the U.S. Census Bureau’s Survey of Income and Program Participation.

Pensions help 4.7 million Americans avoid poverty. According to NIRS, nearly twice as many households headed by someone 60 or older received Social Security benefits, than income from defined benefit plans. Still, over 1 million more households stayed above the poverty line with help from their defined-benefit plan income than from Social Security. The Institute notes that “Social Security is highly effective at helping seniors avoid poverty, but defined benefit pensions enable people to maintain a middle-class standard of living in retirement.”

Pensions substantially reduce material hardships. Over 500,000 Americans would have would have struggled to buy food if not for their defined-benefit plans. About 380,000 would have been unable to pay for rent, mortgage or bills, and 320,000 would have struggled to pay for health care.

Pensions keep 1.4 million Americans off public assistance. According to NIRS, without income from their defined-benefit plans, 1.4 million American households would have to rely on public assistance. The Institute estimates that defined-benefit plans reduced claims to public programs, excluding Medicaid, by $7.3 billion in 2006.