Pension Income in 2010 Resulted in Public Assistance Savings of $7.9 Billion, 4.7 Million Fewer Households in Poverty or Near-Poverty
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Oakley continued, "Now, we're now staring at a future with older Americans - many of them middle class - who may be unable to pay their basic bills and at risk of falling into poverty. There is a steep price to pay when older Americans can no longer be self-sufficient in retirement - either as increased public assistance costs to taxpayers or backsliding to a time with elder Americans living in poverty."
Report co-author Dr. Frank Porell said, "The analysis indicates pensions exert an independent, positive impact on older Americans' economic well-being - an effect we call the 'pension factor.' This 'pension factor' is particularly strong for more vulnerable subpopulations of elder households. In fact, gender and racial disparities in poverty rates, material hardships, and public assistance rates are greatly diminished, and in some cases nearly disappear, among households receiving pension income. The bottom line is that households with a pension fare better than those without - even after controlling for socio-demographic factors such as education, race, gender, and work history," said Porell.
Porell added, "In 2010, governments spent about $7.9 billion dollars less on public assistance to older households because of pension income. This represents about 6.4 percent of aggregate public assistance dollars received by all American households from similar benefit programs. These are substantial dollars, particularly in light of the growing financial pressure on government programs in the wake of the financial crisis."
More specifically, the report estimates that in 2010, DB pension receipt among older American households was associated with:
- 4.7 million fewer poor and near-poor households.
- 460,000 fewer households that experienced a food insecurity hardship.
- 500,000 fewer households that experienced a shelter.
- 510,000 fewer households that experienced a health care.
- 1.22 million fewer households receiving means-tested public assistance.
More broadly, the study also finds:
- a continued decrease in rates of DB pension income receipt likely related to more than three decades of declining DB plan participation rates among active employees.
- increasing numbers of older American workers will be entering retirement without the security of a pension.
- older households with pension income generally fared better during the recent economic turmoil relative to households without such income.
- income from pensions may be especially important to middle income American households.
- lower rates of DB pension receipt are found among older persons living in the West and South relative to other regions.
- pensions have helped many older minority and female-headed households escape poverty.
The analysis was conducted using the U.S. Census Bureau's Survey of Income Program Participation (SIPP) panels. The study sample included SIPP respondents age 60 years or older and all households with a head age 60 and older, who had records in both the Pension and Adult Well-Being topical modules of the survey.
Additional data and analysis is available in the full research brief available at www.nirsonline.org.
The National Institute on Retirement Security is a non-profit 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 including financial services firms, employee benefit plans, trade associations, and other retirement service providers.
kkenneally at nirsonline.org