Pension Dollars: A Net Benefit to State and Local Economies

Retirees play a vital role in the economy. They purchase goods and services, serve in important volunteer and part-time roles, and pay taxes. Retirees who receive a pension provide a level of stability and support to their communities. A recent PERA On the Issues story highlighted the impact retirees with a pension have in rural areas of Colorado.

A new report published by the National Conference on Public Employee Retirement Systems examines the economic impact of pensions in a new way. It includes the economic impact retiree spending has while adding the economic impact pension dollars have before reaching retirees, in the form of investment dollars at work.

Here are the numbers, which use 2018 data from public pensions systems across the country:

• The investment of pension fund assets contributed $872 billion to the US economy
• These investments led to $178 billion in state and local revenues ($647 million in Colorado)
• Retirees received $335 billion in benefit checks ($5.6 billion in Colorado)
• Retiree spending added $836 billion to the economy ($14 billion in Colorado)
• The benefit to state and local revenues from retiree spending equaled $162 billion ($2.4 billion in Colorado)

Researchers then compared contributions employees and employers make to pension funds to the economic output of pension investments and retiree spending. They state: “Pension funds generated $179.4 billion more in revenues than taxpayers contributed to the pension funds.” In Colorado, the net state and local revenue attributable to public pensions was $1.3 billion.