How Has Shift to Defined Contribution Plans Affected Saving?


The brief’s key findings are:

  • Many believe that people are saving less for retirement due to the shift from defined benefit (DB) to defined contribution (DC) plans.
  • The analysis uses National Income and Product Accounts data, with adjustments, to compare DB benefit accruals with DC contributions from 1984-2012.
  • The results show that the percentage of total salaries going to retirement saving has declined slightly during this period.
  • But if returns on asset accumulations are included, the annual change in pension wealth is relatively steady, so the shift to DC plans has not led to less total saving.
  • What has changed is that individuals, rather than plan sponsors, now bear all of the risk.