Average working households in the US have virtually no retirement savings, according to a new report and accompanying public opinion poll released by the National Institute on Retirement Security (NIRS). The report, The Continuing Retirement Savings Crisis, underscores America’s retirement crisis, finding that even near-retirement households have a median retirement account balance of only $14,500.
Public policy, however, “can play a critical role in putting all Americans on a path toward a secure retirement” by “improving low- and middle-income workers’ access to low-cost, high quality retirement plans,” according to the report.
The trend of private sector employers shifting away from defined benefit pensions to defined contribution plans may contribute to Americans’ anxiety about our country’s retirement savings as well as concern for their own financial security. From Americans’ Views of the Retirement Crisis:
- An overwhelming majority (86%) of Americans believe there is a retirement crisis.
- Three in four Americans remain highly anxious about their retirement outlook.
- Americans express strong support for pensions for public employees.
The vast majority of Colorado PERA members participate in the hybrid defined benefit plan, which will most likely be their primary source of retirement income. But PERA also encourages members to participate in voluntary retirement savings plans. PERA offers a 401(k) Plan and a 457 Plan (together called the PERAPlus Plan) with an array of high-quality and low-cost investment options, including a Roth option, that can be used to supplement the PERA defined benefit plan for income in retirement.
Hybrid defined benefitPERA’s Defined Benefit (DB) Plan is “hybrid” in that it combines features of a traditional DB plan with some of the features of defined contribution (DC) plans, such as portability.Defined benefitAlso known as a pension, this is a type of pooled retirement plan in which the plan promises to pay a lifetime benefit to the employee at retirement. The plan manages investments on behalf of members, and the retirement benefit is based on factors such as age at retirement, years of employment and salary history.Defined contributionA type of individual retirement plan in which an employee saves a portion of each paycheck (along with a potential employer match) and invests that money. The employee’s retirement benefit is based on their account balance at retirement. A 401(k) is a type of defined contribution plan.
