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Can we call it a comeback...for DB plans?

Can we call it a comeback...for DB plans?

I hope so. According to a newly-released Towers Watson survey, it looks like defined benefit pension plans are making a comeback – especially among younger workers. 

According to the 2011 Towers Watson Retirement Attitudes Survey, younger workers are increasingly recognizing that guaranteed income in retirement should play a role in the decision-making process when selecting an employer. The survey shows that 63 percent of workers under 40 said that their company’s defined benefit plan was an important factor when they decided to work for their current employer, up from 28 percent in 2009.  DB plans also help with employee retention:  72 percent of the same group of workers say that their employer’s retirement plan is an important reason that they haven’t switched jobs, up from 37 percent in 2009. 

The data also show that younger workers aren’t the only ones who recognize the economic security that pensions can provide. The percentage of workers 40 and older who say that their employer’s defined benefit plan is a big reason why they stay with their current employer is also on the rise. Other findings from this survey show that growing numbers of workers in all age groups would trade pay increases for more generous retirement benefits. Not only that, employees with DB plans are more confident in their ability to retire than those who rely solely on 401(k)s and other retirement savings plans. 

It isn’t that hard to figure out why employees of all ages are placing renewed importance on traditional pensions. After all, these retirement plans provide retirees with guaranteed lifetime income. In 401(k) and other retirement savings plans, workers must figure out how much they can afford to set aside, decide where to invest their money, have the discipline keep the money in the 401(k) until retirement,  and then cross their fingers that the stock market doesn’t crash. Finally, once they do retire, they have to figure out how to make their 401(k) money last. Maybe that’s why at least one poll shows that Americans fear retirement more than death

On second thought, I’m not sure I should call this a comeback. After all defined benefit pension plans have been here for years. Wink.

Now if only employers would listen and stop freezing or terminating their traditional pension plans!

Hat tip to PlanAdviser.
2011 Towers Watson Retirement Attitudes Survey

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