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New survey data on pension benefits
William J. Wiatrowski
A worker approaching the end of his or her career must consider a variety of factors in deciding whether and when to retire. Future expenses, living arrangements, and leisure activities must be examined, as well as the sources and amounts of retirement income available. Pension benefits can be a major source of retirement income, although they can vary widely based on an employee's age and work history.
Employer-provided pension plans often allow employees to retire and begin receiving benefit payments prior to age 65, the customary retirement age in the United States. In private establishments employing 100 or more workers in 1989, nearly 90 percent of full-time participants in defined benefit pension plans could retire at age 55 or earlier, although typically with benefits reduced to account for their receipt over a longer period of time. Furthermore, pension benefits without reductions were available prior to age 65 to nearly 2 out of 3 plan participants.
These data suggest that the "golden years" of retirement can begin sooner than many workers may have expected. But what pension benefits are available for these younger retirees? New data from the Bureau of Labor Statistics indicate that the percent of an employee's preretirement salary replaced by benefits from a pension plan can vary widely-from under 10 percent for some retirees aged 55 to more than 40 percent for some retirees aged 65. This article examines workers' replacement rates - the percentage of the final year's salary provided by a pension payment.
This excerpt is from an article published in the August 1991 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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Evolution of employer-provided defined benefit pensions. December 1991.
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