Why People Need Pensions
Millions of Americans are heading toward an inadequately funded retirement. Without adequate income, older adults will lack the resources that enable them to live independently, afford health care, and continue to contribute to society. While Social Security has kept the majority of older adults from sinking into destitution, far too many retirees are having trouble making ends meet.
The statistics are startling:
- Half of all Americans age 65 or older have incomes of less than $18,819 a year – far less than the amount that most need to meet their day-to-day living and health care expenses.
- Social Security payments to retirees average only $15,179 a year, roughly two-fifths of their earnings before retirement. This is little more than the federal minimum wage of $15,080, and about half of what retirees need if they are to maintain their living standards in retirement.
- Most older adults have little in savings. Only 52 percent receive income from financial assets. Half of those receive less than $1,260 a year.
Even more disconcerting is the fact that the poverty rate among older adults in the U.S. is the fifth highest among major industrialized countries.
The principal reason so many older Americans become poor when they retire is that we rely on a patchwork of private retirement income programs to supplement our Social Security system.
- Older adults who have pensions typically have at least twice the income of those living only on Social Security – $31,077 per year.
Congress has recognized the critical importance of pensions and retirement savings plans by providing them with preferential tax treatment. For 2012, the tax subsidy for private and public retirement plans is $135.8 billion, the largest of all federal tax expenditures.
Looking for help with your retirement plan?
If you have a problem with your retirement plan, free help may be available from the U.S. Administration on Aging's network of Pension Counseling and Information Projects. Find help now.
PensionHelp America connects people who need help with their pension, 401(k), and other retirement plans with the pension counseling projects, legal services providers, and government agencies that can help answer their questions. Visit www.pensionhelp.org.
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Retirement USA is a national initiative that is working for a new retirement system that, along with Social Security, will provide universal, secure, and adequate income for future retirees. Visit the website.
Did You Know?
A 401(k) plan is a retirement savings plan in which the benefit is based on contributions to an individual account and the investment return on those contributions. Typically, employees make contributions to the plan and, in many cases, employers match the employees' contributions. These plans are called defined contribution plans. In most 401(k) and other retirement savings plans, the employee is responsible for choosing among the investments offered by the plan. Other types of retirement savings plans are 403(b) and 457 plans.