Pension Coverage and Retirement Security
AbstractMuch attention has focused on the shift in the private sector from defined benefit to defined contribution plans, primarily 401(k)s. Often forgotten, however, is that, at any given moment in time, only about half of private sector workers are covered by any sort of employer-sponsored plan. This lack of coverage has two implications. First, a substantial proportion of households – roughly one-third – ends up with no pension coverage at all during their entire worklife and must rely exclusively on Social Security during retirement. And, even under current law, Social Security will provide less in the future relative to pre-retirement earnings than it has in the past. Second, with median job tenure of about four years in 2008, many employees move in and out of coverage so that they end up with inadequate 401(k) balances. This brief proceeds as follows. The first section describes the extent to which private sector workers are covered by any retirement plan. The second section explores the implications of the lack of universal coverage. The third section discusses policy initiatives to improve coverage. The key finding is that, absent a government initiative, pension coverage is unlikely to increase, which – coupled with declining earnings replacement under Social Security – means that many future retirees will end up with inadequate incomes.
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Bibliographic InfoPaper provided by Center for Retirement Research in its series Issues in Brief with number ib2009-9-26.
Length: 9 pages
Date of creation: Dec 2009
Date of revision: Dec 2009
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This paper has been announced in the following NEP Reports:
- NEP-AGE-2010-04-17 (Economics of Ageing)
- NEP-ALL-2010-04-17 (All new papers)
- NEP-LAB-2010-04-17 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- William E. Even & David A. MacPherson, 1994.
"Why did male pension coverage decline in the 1980s?,"
Industrial and Labor Relations Review,
ILR Review, Cornell University, ILR School, vol. 47(3), pages 439-453, April.
- Even, W.E. & Macpherson, D.A., 1991. "Why Did Male Pension Coverage Decline in the 1980s?," Working Papers, Department of Economics, Florida State University 1991_08_01, Department of Economics, Florida State University.
- Alicia H. Munnell, 2003. "The Declining Role Of Social Security," Just the Facts, Center for Retirement Research jtf-6, Center for Retirement Research.
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