How the shift away from traditional pensions has widened the retirement wealth gap.
Monique Morrissey, EPI.

Reposted from

Monique Morrissey is an economist specializing in retirement security and financial markets at the Economic Policy Institute in Washington. EPI has made its mark as the premier think tank in D.C. focused on the economic condition of low- and middle-income Americans. Notably nearly 30 percent of its support comes from organized labor, which makes it a little different than the typical Washington think tank.

Morrissey recently published a research brief focusing on ways that the shift away from traditional pensions, and toward 401ks, has increased the gaps in retirement readiness based on income, race, education and marital status. The brief make its case through a series of charts based on Federal Reserve data, accompanied by commentary. It paints a troubling picture.

Morrissey argues that the shift away from pensions has been disastrous for low income people, blacks, Hispanics and single workers, and people without college degrees. But more affluent households often don’t have adequate retirement savings or benefits either – and women are much more vulnerable in retirement due to their lower lifetime earnings and longer life expectancy.

More than twice as many families have defined contribution plans as defined benefit pensions, but participation in pensions is more equal across education, race, and income groups. she found:

Pensions are concentrated mostly in the public sector these days, but overall about one in five workers still does participate in these plans, she finds. For those workers, retirement income is distributed more evenly because of the universal participation – and the fact that benefit credits accrue automatically, no matter your level of contribution.

Morrissey argues that that our current retirement system does not work for most workers. As a result, we need to preserve and expand Social Security, defend defined benefit pensions for workers who have them, and find new solutions for those who do not.


2 thoughts on “How the shift away from traditional pensions has widened the retirement wealth gap.

  1. Fred, thank you, this is really worth sharing. We are quite fortunate to have what we’ve gained. It certainly should never be taken for granted. Bob Lyons

    Sent from my iPhone


  2. I am glad this is finally being published. However, I don’t think it mentions one of the main causes of the “shift away from traditional pensions”, which is de-unionization. IRAs and 401(k)s, may have started off as a well-intentioned idea, as a supplement to pensions. They are now a cruel hoax companies use to deceive low and mid-income workers into thinking they will have an adequate retirement. Many of these workers don’t have adequate income, period. This is also a result of the de-unionization of most of the private sector workforce. Many of these workers end up saving into their IRAs and 401(k)s but end up having to slowly put some of their day to day expenses on credit cards, which debt piles up. Their IRAs and
    401(k)s are indirectly being funded by their credit cards. They end up paying a far higher rate of interest to the credit cards then what the IRAs and 401(k)s pay. When they reach retirement age, they find they have to keep working several more years, some find they will never be able to retire until well into their 70s. These accounts DO NOT REPLACE A PENSION OR MAKE UP FOR A LOW WAGE!
    If a worker has enough income to save some money without going into a lot of credit card debt, then these IRAs and 401(k)s are a good benefit. The 403(b) and 457 (cousins of 401k), can have the same problems although the employers (usually government) are much more likely to be unionized and have better wages and actual pension systems.

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