A new report highlights how spending by public sector retirees across the United States helped support jobs and local economies during the tumultuous first year of the COVID-19 pandemic.
In Pensionomics 2023, researchers from the National Institute on Retirement Security (NIRS) state public and private pension plans paid out nearly $613 billion in retirement benefits in 2020, resulting in $1.3 trillion in total economic output as retirees turned around and spent those dollars. Retirees also paid taxes on those benefits, paying nearly $158 billion to federal, state and local governments. In total, NIRS estimates retiree spending supported nearly 6.8 million U.S. jobs in 2020.
Pension benefits from state and local plans made up more than half of the pension benefits paid that year, totaling more than $334 billion, according to NIRS. In Colorado alone, public sector retirees received $5.5 billion in pension benefits in 2020, translating to $7.9 billion in total economic output and supporting 45,267 jobs. Those jobs represented 1.5 percent of the state’s total workforce.
Colorado PERA’s economic impact
PERA is the largest retirement plan serving public employees in Colorado with nearly 650,000 members.
More recently, in 2021, PERA paid $4.35 billion in retirement benefits to more than 110,000 Colorado retirees. That resulted in $6.8 billion in total economic output and supported 31,449 jobs statewide, according to a report by Pacey Economics. In addition, retirees paid $382.2 million in state and local taxes on those PERA benefits.
The steady stream of income that defined benefit pensions provide is an important economic driver, providing a measure of stability when it’s needed the most.
“Every month, PERA pays out hundreds of millions of dollars to retired public employees and their beneficiaries across Colorado, and those dollars are spent in their local communities,” said PERA Executive Director Ron Baker. “Retiree and beneficiary spending is a vital part of Colorado’s economy, and the stabilizing effect of that spending has been evident amid the economic uncertainty we’ve experienced in recent years.”
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.