Rates of poverty among older Americans without defined benefit pensions were nine times greater in 2010 than for those with the pension plans, up from six times greater in 2006, according to a new report from the National Institute on Retirement Security.
The study is based off U.S. Census data for heads of households 60 years or older.
The percentage of households with members in DB plans dropped to 43% in 2010 from 48% in 2006. If those households had no DB income, there would be 4.7 million more households classified as poor or near-poor, in 2010, or 39% more than in 2006. “Near poor” is defined as up to 200% of the federal poverty level. In 2010, the poverty level was $10,458 for a single elderly household and $13,180 for two people.
Those households with DB income also saved federal and local governments roughly $7.9 billion in public assistance to older households in 2010, noted the report's co-author, Frank Porell, a gerontology professor the University of Massachusetts Boston. “These are substantial dollars, particularly given the pressure on government finances,” he said on a conference call Thursday.
Diane Oakley, NIRS executive director and co-author, also said on the conference call that “these findings couldn't come at a worse time” as an estimated 75 million Baby Boomers start retiring, while DB coverage declines and retirees struggle to recoup investment losses of recent years.
This report sounds “an alarm bell for policymakers and taxpayers,” Ms. Oakley said.
The report updates a 2009 study based on 2006 data preceding the financial crisis. “The Pension Factor 2012: Assessing the Role of Defined Benefit Plans in Reducing Elder Economic Hardships," is available from the institute.