Pensions enhance security, health for older Americans

The poverty risk for older Americans increases 50 percent if they do not have a defined benefit pension plan to fall back on, according to a new study by the National Institute on Retirement Security.

The rates of poverty among older households lacking defined benefit pension income were about nine times greater than the rates among older households with DB pension income in 2010, up from six times greater in 2006.

Elderly people with access to a pension also are less likely to need food, shelter, health care or public assistance.

“The Pension Factor 2012: Assessing the Role of Defined Benefit Plans in Reducing Elder Economic Hardships” was an update from a previous study that looked at 2006 data. The report’s authors found that, although there were numerous other factors that could lead to someone falling into poverty or near poverty, having access to DB income definitely kept an estimated 4.7 million households out of poverty or near poverty.

The benefits also saved taxpayers nearly $8 billion because 1.22 million fewer households received means-tested public assistance, like Supplemental Security Income from Social Security, said Diane Oakley, executive director of NIRS, during a webinar on the report.

It also found that there were 460,000 fewer households experiencing food hardship in 2010; 500,000 fewer households experiencing shelter hardship; and 510,000 fewer elderly Americans experiencing health care hardship because of having DB income in their retirement.

According to the report, the percentage of older Americans, age 60 and over, with defined benefit pension income has steadily decreased since 2003, when 34 percent had access to a DB pension plan. In 2006, that number was 32 percent and in 2010, it was 28 percent.

Of the 35.4 million older households in the U.S., 66.1 percent were classified as not poor. Of households with a DB pension income, 83.6 percent were not poor.

DB pension income also helps narrow the gaps in poverty experienced by women and minorities. In 2010, only 2 percent of women with a pension were classified as poor, while 18.4 percent of women without a pension had the same designation.  Only 2.9 percent of older black households were poor compared to 26.9 percent of those without a pension. Hispanic and other races experienced similar gaps in poverty.

The report was co-written by Frank Porell, professor of gerontology at the University of Massachusetts Boston.


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