A report from the National Institute on Retirement Security published in July of this year focuses on the economic benefits that defined benefit (DB) pension plans provide to millions of Americans and society as a whole. The report, titled Pensionomics 2014 (written by Nari Rhee, PhD), highlights that U.S. defined benefit pension plans paid out almost $477 billion in benefits in 2012. Moreover, the ripple effect of that money as it was spent added up to $943 billion in total economic output nationwide.
Although DB pensions have largely been supplanted by 401Ks, IRA and other retirement plans today, millions of older Americans are comfortably enjoying their Golden Years due to their lifetime benefits from well-managed DB pension plans.
Statistics on 2012 DB pension plans
The NIRS report notes that the $477 billion in pension benefits paid to some 24 million retired Americans and their families include:
- Around $228.5 billion in benefits paid out to more than nine million retired employees of state and local government and their beneficiaries (most frequently surviving spouses);
- More than $70.7 billion paid out to some 2.5 million federal government pension beneficiaries;
- Almost $175.6 billion paid out to some 12.7 million private sector pension beneficiaries.
Economic ramifications of 2012 DB pension benefits
Pensionomics 2014 also highlights how the billions in pension benefits paid out every year ramify throughout the American economy.The report notes that the $477 billion paid out in 2012 led to:
- 6.2 million American jobs that paid nearly $307 billion in labor income;
- $943 billion in total economic output nationwide;
- $555 billion in value added GDP;
- $135 billion in federal, state, and local tax revenue.
The NIRS report also points out that each dollar paid out in pension benefits supported $1.98 in total economic output nationally. The report also notes that every taxpayer dollar contributed to state and local pensions supported $8.06 in total national output.
In concluding, the NIRS report lauds the current DB pension system and highlights that the many positive economic benefits from pension pay outs are largely due to “…the leverage afforded by robust long-term investment returns and shared funding responsibility by employers and employees.”
The full report can be found here