The National Institute of Retirement Security (NIRS) recently released a report, Pensionomics, highlighting the economic impact of pension plans across the country.
Distributions from pension plans like Colorado PERA create substantial economic benefits in local communities where retirees live. NIRS created state-specific fact sheets that detail the economic impact of retirement distributions in each state. The Colorado fact sheet includes the impact of all retirement distributions in the state, but the bulk of retirement distributions made in Colorado are those made to PERA retirees.
As the study authors note, “Because pensions supply secure income to retirees, pensions provide local economies with stable sources of revenue.”
Nationwide, the NIRS study found that over $943 billion in total economic output resulted from spending coming from defined benefit pension plans in 2012. Those same expenditures also supported 6.2 million American jobs that paid $306.9 billion in income in that year. Also in 2012, the benefits that defined benefit pension plans paid out supported $135.1 billion in tax revenue at the local, state, and federal levels.
As they do across the country, retirees in Colorado spend their pension benefit distributions on everything from food and entertainment to health care, housing, transportation and even taxes. That spending creates a ripple effect in local economies, sustaining local businesses and supporting employment.
And reliable income from plans like PERA can be especially important during economic downturns. Retirees who know they will receive a steady check despite economic conditions will spend that regular income, helping to stabilize the economy more broadly.
Local economists at Pacey Economics worked with PERA to research the economic and fiscal impacts of spending by PERA retirees across Colorado. What they found is that PERA is one of Colorado’s best investments.
- PERA provides $3.35 billion in annual benefit distributions to Colorado residents – distributions that are prefunded, by both employee and employer contributions, and invested while a member is working.
- Annual benefit distributions to Colorado residents result in $4.78 billion in total output, of which more than $2.0 billion is value added above the benefit distributions, or newly created goods and services that result.
- This economic impact contributes to $1.12 billion in labor income, helping to sustain nearly 26,000 jobs in Colorado.
- Benefit distributions also help produce more than $280 million in state and local tax revenue.
When households receive PERA benefit distributions, those dollars are spent in local economies across the state, creating a chain reaction. The impact of a dollar spent has a ripple effect across the economy, so that one retiree’s spending becomes someone else’s income.
In addition to measuring the impact of its distributions throughout Colorado, PERA looked in more detail at the economic impact in nine different regions across the state:
- Colorado Springs
- Eastern
- Metro Denver
- Mountain
- Northern
- Pueblo‒Southern Mountains
- San Luis Valley
- Southwest Mountains
- Western
The reliable distributions that go to retirees in Colorado from PERA and similar pension funds have an impact far beyond PERA’s more than 500,000 members. From local restaurants to doctors and hospitals, small businesses and Colorado communities see a direct benefit from retired public workers who have contributed to Colorado throughout their careers and continue to do so in retirement.
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.
