An Update on Private Pensions

Alicia H. Munnell Pamela Perun

IB#50

Introduction

Employer-sponsored pensions are an important source of retirement income and often make the difference between having a comfortable retirement and just scraping by. However, at any given time, only about half of workers are covered by pension plans. In addition, the sea change in the nature of pension coverage from traditional defined benefit plans to 401(k)-type defined contribution plans means that the amount of income that individuals will receive from pension plans in the future is uncertain.This brief, which updates our previous work, explores who is covered by a pension plan and who is not, how much retirees receive in pension income, and how pension coverage and receipt have changed over time. The key finding is that total pension coverage has remained stagnant while the nature of coverage has continued to shift to 401(k) plans. These developments, coupled with declining levels of earnings replacement under Social Security, mean that future retirees will have to work longer if they want to maintain their pre-retirement standard of living in retirement…