BLS report shows declining DB coverage
The Bureau of Labor Statistics (BLS), part of the U.S. Department of Labor, has published an article in the December 2012 Monthly Labor Review, showing changes over the years to coverage via defined benefit (DB) plans.
In the 1980s, DB plans were still fairly common. According to the BLS, in 1981, more than 80% of full-time workers in large establishments were covered in a DB plan. Even in the early 1990s, about 35% of all workers in private sector establishments of all sizes were covered by a DB plan. As of 2011, the figure dropped to 18%. The one area in which DB coverage is still substantial is for state and local government employees (78% as of 2011), but even this is the subject of debate during state budget discussions.
One in four DB participants are in frozen plans (closed to future participants), with the percentage increasing as more people retire and no new participants can join the DB plan. While 10% of private industry employers offer DB plans, the figure is 48% for employers with 500+ employees. DB plans cover about two out of every three union members in private industry, but only about one in eight nonunion workers. The utility industry has the greatest DB coverage, with 81%; other industries trail far behind. The Mid-Atlantic and Midwest states have the greatest concentration of DB plans.
You can find the full article, The Last Private Industry Pension Plans: A Visual Essay, on the BLS website.
Searching for retirement savings rainbow
AARP has released an important study that looks at the challenges the middle class is facing on the road to a secure retirement. Authored by Barbara A. Butrica of the Urban Institute and Mikki D. Waid of the AARP Public Policy Institute, the conclusions are many; here are some of the key ones:
The full report, What Are the Retirement Prospects of Middle-Class Americans?, is available on the AARP website.
NYC Midtown Taxi Time
The U.S. Government Accountability Office (GAO) has released a study, Retirement Security: Annuities with Guaranteed Lifetime Withdrawals Have Both Benefits and Risks, but Regulation Varies Across States. To protect against outliving one's assets, many people purchase annuities. Two of these products are the Variable Annuity - Guaranteed Lifetime Withdrawal Benefit (VA/GLWB) and the Contingent Deferred Annuity (CDA). The VA/GLWB is held in a separate account of the insurer, while the CDA typically is held in an investment account held by the purchaser. The GAO report highlights the features of VA/GLWBs and CDAs, as well as their differences, such as how they are regulated on a state and/or federal level, and risks and benefits. The GAO report is posted on its website, as is a related podcast.
Bird's-eye view in Florida
The Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) just released at the end of 2012 the results of their annual look back at the prior year's (2011) retirement data. The EBRI-ICI project encompasses some 24 million 401(k) participants in 64,000+ plans, with $1.4 trillion in assets.
EBRI-ICI reports that the average account balance is $58,991, which was down slightly from 2010. Four in ten participants had account balances less than $10,000, while only one in six had more than $100,000. About three-quarters of participants had lower account balances than the average. The report looks at other data as well, including asset allocation and plan loans.
EBRI and ICI anticipate digging deeper into the data in 2013, particularly focusing on what they term "consistent" participants. These are individuals who have been in a 401(k) plan for a given, longer period. This will be very helpful as it will give a better perspective on the success of savings or lack thereof. The current research appears to limit itself to data from current employment, so account balances may be lower for those who have recently changed jobs. Similarly, those starting out in their careers naturally will have lower balances, so a plan with a higher representation of this demographic may appear to have lesser assets. This future analysis should prove to be very interesting. The latest report is available on both the EBRI and ICI websites.
Ingredients for secure retirement coming into focus
As we start 2013, there appears to be cautious optimism on the road to retirement savings. Account balances are improving and research is suggesting that retirees may have greater financial resources to tap than was originally thought. We highlighted some of these studies released during 2012. See the blog posts below, including the following topics:
Feedback on these and other posts is welcome either by posting comments after the blogs or by e-mail.
Blog Author - Ken Felsher
With over 25 years of writing, editing, and research experience. I enjoy sharing with my readers my love of working with content on a variety of subjects.
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