Monday, September 8, 2008

Defined-benefit pension is a huge contributor to financial security in retirement

A recent study concludes that households with a defined-benefit pension as well as Social Security and savings are far less likely to outlive their savings than households without a defined-benefit pension.

The study conducted by Ernst & Young LLP examined the retirement savings and other resources for Americans with $50,000 to $100,000 of preretirement income. A couple with preretirement earnings of $75,000 that will have a pension has a 31 percent chance of outliving their assets. That couple without a pension has a 90 percent chance of outliving assets.

The study confirms what Alicia Munnell, director of the Center for Retirement Research at Boston College, has been warning for years - that a smaller role for Social Security benefits, rising Medicare premiums, and disappearing pensions will make the retirement of younger workers far more difficult than those of current and past

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