Retirement Security: A Thing of the Past?

Consumers tell researchers the retirement system remains broken even as the economy recovers.


While pensions seem less affordable than ever, they remain the overwhelming retirement choice of consumers. According to new research, the Great Recession exposed such fundamental flaws in America's retirement support system that consumers overwhelmingly think the current system is broken beyond repair.

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In response to the downturn and their own inadequate retirement savings, consumers have sharply lowered their expectations for their retirement years. Retirement delays and reduced spending plans have been widely reported. The new research, commissioned for the National Institute on Retirement Security (NIRS) found that traditional hopes for "the good life" have all but disappeared. "Only 11 percent [of consumers] expect retirement to include leisure, travel, restaurants, and/or hobbies," according to the report. Nearly three-quarters of Americans feel that the disappearance of traditional pensions "has made it hard for workers to achieve the American dream."

Even two years into an admittedly tepid economic recovery, "nearly 9 out of 10 Americans believe the retirement system is under stress and needs to be reformed," according to a poll commissioned for NIRS. "More than 80 percent of Americans believe that the recent economic downturn exposed the risks of America's retirement system. Nearly three-quarters of Americans believe that stock market volatility makes it impossible for the average American to predict how much money they will have in their nest egg when they retire, underscoring the potential flaws of the current retirement system."

Similarly large percentages of people think retirees with pensions enjoy more reliable retirement prospects than employees depending on voluntary retirement plans such as 401(k)s, according to the NIRS report "Pensions and Retirement Security 2011: A Roadmap for Policy Makers." The report cited research that found pensioners are, in fact, better prepared financially for retirement.

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The disappearance of traditional pensions has been happening for 30 years. And financial pressure on remaining plans, particularly among public-sector employees, has exposed enormous unfunded pension liabilities. "In 1975, a full 88 percent of private sector workers had a defined benefit [DB] pension. By 2005, this number had dwindled to 33 percent," the report said. "And private-sector DB plan freezes have continued through the 2000s. In 2004, just 4 percent of Fortune 1000 plan sponsors had frozen DB plans; yet by 2009, a full 31 percent of these companies had frozen plans."

Echoing other recent polls, the survey says there is strong public opposition to trimming Social Security. "Nearly 8 in 10 Americans (79 percent) indicate that leaders in Washington do not understand how hard it is to prepare for retirement." Beyond maintaining and even strengthening Social Security benefit levels, people said, they want government to make it easier for employers to offer expanded retirement and pension programs.

NIRS is a pro-pension Washington nonprofit whose members include retirement plans, administrators, and financial-service firms. The research was conducted by Mathew Greenwald & Associates, which specializes in employee benefit and financial services research.

Twitter: @PhilMoeller