Retirement insights from a Colorado PERA perspective

A distant view shows a mountainous landscape with sloping peaks, green trees in the foreground, and a cloudy sky above.

The American public continues to hold positive opinions of defined benefit pension plans, according to <a href="https://www.nirsonline.org/reports/what-do-americans-think-about-pensions-for-public-employees/" target="_blank" rel="noreferrer noopener">the latest survey data from the National Institute on Retirement Security</a> (NIRS).



Researchers contacted more than 1,200 adults aged 25 and older across the country to understand public opinion about defined benefit plans like what Colorado PERA offers. They found 86% of survey respondents think all workers should have access to a defined benefit pension, and not just public employees.



In addition, while Americans may be divided politically, the NIRS survey found strong agreement on the value of pensions. More than 80 percent of each political group—Democrats, Republicans, and Independents—voiced their support for pensions.



Unlike a defined contribution plan such as a 401(k), a defined benefit plan like the PERA Defined Benefit Plan provides retirement income a person cannot outlive. That makes for a valuable benefit that can be a powerful tool in maintaining a qualified workforce.



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="2428" height="1414" src="https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions.png" alt="Two pie charts showing results of a survey of Americans' attitudes toward pensions. The left chart shows 82% of Americans agree that pensions are a good way to recruit and retain qualified teachers. The right chart shows 84% of Americans agree that pensions are a good way to recruit and retain qualified public safety employees." class="wp-image-54938" srcset="https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions.png 2428w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-300x175.png 300w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-1024x596.png 1024w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-768x447.png 768w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-1536x895.png 1536w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-2048x1193.png 2048w" sizes="(max-width: 2428px) 100vw, 2428px" /><figcaption class="wp-element-caption">Image courtesy: National Institute on Retirement Security</figcaption></figure>



Defined benefit plans are most common in the public sector today, and the NIRS survey asked respondents whether they agreed that pensions are a valuable tool to recruit and retain workers who provide important public services, such as teachers and public safety workers. The survey found 82% agree that pensions help recruit and retain teachers and 84% agree that they help recruit and retain public safety workers.



Since 1931, Colorado PERA has been helping support Colorado’s public workforce by providing lifetime retirement and other benefits. In addition to the PERA Defined Benefit Plan, PERA members have access to defined contribution plans, health care benefits, and more, ensuring the state’s public workers have the tools they need for a secure retirement.

Survey Finds Strong Support for Public Pensions

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In a new survey, workers overwhelmingly said benefits are a key factor in determining where to work, with 70% of respondents saying they would be willing to switch jobs to gain better benefits. The survey found younger workers value education and training benefits, while 87% of older workers said retirement benefits are a top priority.



<h4 class="wp-block-heading"><a href="https://www.thinkadvisor.com/2024/04/23/dol-releases-final-fiduciary-rule/" target="_blank" rel="noreferrer noopener">DOL Releases Final&nbsp;fiduciary&nbsp;Rule | ThinkAdvisor</a></h4>



The U.S. Department of Labor has released the final version of a new rule that clarifies who is considered a&nbsp;fiduciary&nbsp;when providing investment advice. Experts say the new rule adds protections for consumers, who can be more confident they’re receiving good financial advice that’s in their best interests.



<h4 class="wp-block-heading"><a href="https://coloradosun.com/2024/04/30/colorado-prescription-drug-affordability-board-concerns/" target="_blank" rel="noreferrer noopener">Colorado Wants to Lower Prescription Costs. Why Are Patients Opposed? | The Colorado Sun</a></h4>



Three years ago, Colorado created the Prescription Drug Affordability Board to review drug prices and potentially place limits on how much manufacturers can charge for medications. Drugmakers have pushed back against the board’s authority, and some patient advocates have now joined the opposition out of fear that price caps could lead to manufacturers pulling their life-saving drugs from Colorado pharmacies.



<h4 class="wp-block-heading"><a href="https://www.nirsonline.org/reports/women2024/" target="_blank" rel="noreferrer noopener">What Do Women Think About Retirement? | National Institute on Retirement Security</a></h4>



There’s long been a gender gap in retirement, with women generally having less money saved due to lower wages and other factors. According to a recent survey of working women, more than 75% of women think retirement is only getting harder, and 82% say every worker should have access to a pension for retirement security.



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News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.

News You Should Know: Majority of Workers Say Benefits Influence Job Choices

In this story:



<ul><li>In a recently published study, a majority of Americans agree on how to combat retirement insecurity</li><li>Responses indicate retirees need to know more about managing investments to last through retirement</li><li>A majority of those surveyed said access to a defined benefit program brings security that can&#8217;t be found in 401(k)-style plans alone</li><li>In particular, DB plans help offset market risk and the risk of outliving savings</li></ul>



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“What do Americans think about retirement security?”



This was the central question to a <a href="https://www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf" target="_blank" rel="noreferrer noopener">study</a> conducted by the National Institute on Retirement Security. The study took place in 2020 and involved participants from across the country.



<a href="https://peraontheissues.com/national-attitudes-on-retirement-security-part-1/" target="_blank" rel="noreferrer noopener">Part 1 of this story</a> covered the issues that survey participants raised:



<ul><li>67% of respondents said the U.S. faces a retirement crisis</li><li>56% are concerned they won’t become financially secure, and 58% said it’s getting harder as time goes on</li><li>68% said they aren’t able to save enough to guarantee a secure retirement</li></ul>



In addition to highlighting concerns, the study also shed light on ideas and solutions.



<h4 class="wp-block-heading">Better Access to Information</h4>



More than 70% of those surveyed agreed: “the average retiree does not know enough about managing investments to be able to make their retirement savings last.”



This insight could mean that retirees need or want more opportunities to enhance their financial literacy.



Some organizations, including PERA, offer educational opportunities to members and customers in the form of workshops, webinars, and online tools. But not all do.



Furthermore, 55 million Americans do not even have access to the retirement savings plans that often come with these educational opportunities.



<h4 class="wp-block-heading">Limit Uncertainty in Retirement</h4>



Even the best access to sound financial information can’t eliminate certain risks:



<ul><li>Outliving your life expectancy – <a href="https://www.forbes.com/sites/wadepfau/2019/12/06/changing-risks-in-retirement-part-two-unknown-longevity/?sh=a120b57652bb" target="_blank" rel="noreferrer noopener">and your savings</a></li><li>Experiencing underperforming market returns, particularly <a href="https://www.kiplinger.com/article/retirement/t037-c032-s014-retirees-can-t-overlook-sequence-of-return-risk.html" target="_blank" rel="noreferrer noopener">at the beginning of retirement</a> &nbsp;</li><li>Reduced ability to manage money as you age</li></ul>



In the face of these uncertainties, survey participants said that defined benefit plans are a good solution for retirement planning compared to relying completely on self-directed investing plans:



<ul><li>54% said they would trade savings for guaranteed income.</li><li>65% agreed that “pensions do more to help workers achieve a secure retirement as compared to retirement savings plans such as 401(k)s.”</li><li>75% said: “all workers should have access to a pension plan so they can be independent and self-reliant in retirement.”</li></ul>



<h4 class="wp-block-heading">Final Thoughts</h4>



Retirement looks different for everyone. But obtaining a sense of security is a goal that nearly all retirees share.



Different financial tools work together to contribute to increased security:



<ul><li>Access to quality financial education can lead to more informed decision-making and planning</li><li>Access to self-directed retirement plans, including the 401(k) and 457 options PERA members have with PERAPlus, give flexibility about contributions, investments, and withdrawals</li><li>Access to a defined benefit plan like PERA members have leads to a stream of lifetime income, which helps offset many of the risks retirees face</li></ul>



Voicing support for policies that promote financial security helps ensure that retirees are able to spend their retirement years — whatever that looks like for them — in confidence.

National Attitudes on Retirement Security, Part 2

<h4 class="wp-block-heading">States that close pension plans face increased costs, retirement insecurity</h4>



A new <a href="https://www.nirsonline.org/reports/enduring-challenges-examining-the-experiences-of-states-that-closed-pension-plans/">series of case
studies</a> released from the <a href="http://www.nirsonline.org">National Institute
on Retirement Security</a> (NIRS) shows that taxpayers’ costs increased when
four states closed their pension plans in favor of alternative plan designs. As
the states shifted new employees from their defined-benefit pension plans to
defined-contribution or cash-balance plans, they did not experience major
improvements in the funding of their existing pensions.



Key conclusions from the research, Enduring Challenges: Examining
the Experiences of States that Closed Pension Plans, include:



<ul>
<li>Switching
from a defined benefit pension plan to a defined contribution or cash balance
plan did not address existing pension underfunding, despite claims that such
changes would improve funding levels or slow growing liabilities of the
retirement plans. Instead, costs for the states reviewed (Alaska, Kentucky, Michigan and
West Virginia) increased after closing their
pension plans.</li>



<li>Changing
benefits for new hires does not solve existing funding shortfalls, as the
experience of these states shows. Managing legacy costs is key to responsible
funding of pension plans.</li>



<li>Greater
retirement insecurity for employees has been a challenge due to changes in plan
design, leading West Virginia to reopen its closed pension plan.</li>



<li>Other
workforce challenges, such as difficulty recruiting and retaining public
employees, are emerging as a result of the changes to retirement benefits. In
Alaska, the Department of Public Safety lists the ability to offer a pension as
a “critical need” for the department.</li>
</ul>



Download the NIRS case studies <a href="https://www.nirsonline.org/wp-content/uploads/2019/08/Enduring-Challenges-Final.pdf">here</a>.

Solving pension challenges has not been easy in other states

Recent research by the <a href="https://www.nirsonline.org/" target="_blank" rel="noreferrer noopener">National Institute on Retirement Security</a> (NIRS) finds that inequalities in access and eligibility for employer-sponsored retirement plans result in retirement savings gaps for Latinos. As a result, <a href="https://www.nirsonline.org/wp-content/uploads/2018/12/latinoretirement_unidosus_nirs_report_112818_lr.pdf" target="_blank" rel="noreferrer noopener">Latinos are falling behind in preparing for retirement</a>.



Why does this matter? As the largest minority group in the U.S. workforce, Latinos comprised 16.8 percent of the labor force in 2016. (According to the <a href="http://www.pewhispanic.org/states/state/co/" target="_blank" rel="noreferrer noopener">Pew Research Center</a>, the Hispanic population in Colorado is even higher – at 21 percent in 2014.) Latinos lead population growth in United States, accounting for 17.8 percent of the total U.S. population and numbering over 57.5 million. The U.S. Census Bureau estimates that by 2060, the Latino population will number 119 million and will account for approximately 28.6 percent of the nation’s population. Additionally, the U.S. Administration on Aging predicts the Latino population that is age 65 and older will number 21.5 million and will comprise 21.5 percent of the population by 2060.



The NIRS research finds that access and eligibility to employer-sponsored retirement plans remains the largest hurdle to Latino retirement security.



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="605" height="466" src="https://content.copera.org/wp-content/uploads/2024/04/Fig1-1.png" alt="Bar graph showing the percentage of workers with retirement plan access by ethnicity: latinos 53.7%, all 69.8%, white 73.4%, non-white 62.2%." class="wp-image-46364" srcset="https://content.copera.org/wp-content/uploads/2024/04/Fig1-1.png 605w, https://content.copera.org/wp-content/uploads/2024/04/Fig1-1-300x231.png 300w" sizes="(max-width: 605px) 100vw, 605px" /></figure>



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="605" height="462" src="https://content.copera.org/wp-content/uploads/2024/04/Fig2.png" alt="Bar chart showing the percentage of workers eligible for an employer-sponsored retirement plan by ethnicity, with latinos having the lowest eligibility rate at 60.3%." class="wp-image-45244" srcset="https://content.copera.org/wp-content/uploads/2024/04/Fig2.png 605w, https://content.copera.org/wp-content/uploads/2024/04/Fig2-300x229.png 300w" sizes="(max-width: 605px) 100vw, 605px" /></figure>



However, when offered a retirement plan for which they are eligible, Latinos participate at the same or higher rates than other Americans.



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="602" height="483" src="https://content.copera.org/wp-content/uploads/2024/04/Fig3.png" alt="Bar chart comparing participation rates in employer-sponsored retirement plans among latinos, all workers, white and non-white eligible workers, and latino workers, indicating similar high rates of participation for all groups." class="wp-image-45245" srcset="https://content.copera.org/wp-content/uploads/2024/04/Fig3.png 602w, https://content.copera.org/wp-content/uploads/2024/04/Fig3-300x241.png 300w" sizes="(max-width: 602px) 100vw, 602px" /></figure>



Despite these high take-up rates, Latino workers had the lowest participation rate in employer-sponsored retirement plans, at only 30.9 percent, compared to 53 percent of white workers. The top reason Latinos did not have retirement savings was that they worked part-time, resulting in less access to retirement savings plans. Many employers are allowed by law to exclude part-time workers from participation in their retirement plans.



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="605" height="458" src="https://content.copera.org/wp-content/uploads/2024/04/Fig4.png" alt="Bar chart showing lower participation rates in employer-sponsored retirement plans among latinos compared to all workers and white, non-latino workers." class="wp-image-45247" srcset="https://content.copera.org/wp-content/uploads/2024/04/Fig4.png 605w, https://content.copera.org/wp-content/uploads/2024/04/Fig4-300x227.png 300w" sizes="(max-width: 605px) 100vw, 605px" /></figure>



The NIRS study states that allowing part-time workers to participate in employer-sponsored retirement plans would greatly increase the number of Latinos that could save for retirement.



The gap between Latinos and whites is particularly significant in the private sector, with 47.7 percent of Latinos participating compared to 67.1 percent of whites, a difference of 19.4 percent. In the public sector, retirement plan participation is higher across the board. While the gap in participation for Latinos persists, it is far narrower with 86 percent participation compared to 94.1 percent of whites, a difference of 8.1 percent in public plans.



One part of the solution to the retirement savings gap could be greater awareness of the <a href="https://www.nerdwallet.com/blog/taxes/can-you-take-the-savers-credit/" target="_blank" rel="noreferrer noopener">Saver’s Credit</a>. The Federal Saver’s Credit is a non-refundable income tax credit for taxpayers with adjusted gross incomes of less than $31,500 for single filers and $63,000 for joint filers. Because the median household income for Latinos was $46,882 in 2016, a large number of these households would qualify for the Federal Saver’s Credit if they saved for retirement. By widely promoting the credit, many more Latino households could be rewarded for saving for retirement.



Finally, NIRS recommended that more states explore the adoption of state retirement plans, noting that in 2014, an estimated 103 million Americans between 21 and 64 had no access to an employer-sponsored retirement account. State retirement savings plans can provide low-cost retirement products to working Latinos and other Americans who are not covered by a workplace retirement plan, thereby helping to alleviate the current retirement savings crisis that Latinos, <a href="https://content.copera.org/latinos-falling-behind-other-americans-in-retirement-preparedness-research-shows/" target="_blank" rel="noreferrer noopener">and many others</a>, face.



Read the <a href="https://www.nirsonline.org/wp-content/uploads/2018/12/latinoretirement_unidosus_nirs_report_112818_lr.pdf" target="_blank" rel="noreferrer noopener">NIRS study</a>.



Additional PERA on the Issues articles on NIRS retirement research:



<a href="https://www.copera.org/latinos-falling-behind-other-americans-in-retirement-preparedness-research-shows" target="_blank" rel="noreferrer noopener">Good news for millennials with access to retirement plans</a>



<a href="https://www.copera.org/latinos-falling-behind-other-americans-in-retirement-preparedness-research-shows" target="_blank" rel="noreferrer noopener">PERA works for Colorado stakeholders</a>

Tag Archives:

Survey Finds Strong Support for Public Pensions

News You Should Know: Majority of Workers Say Benefits Influence Job Choices

National Attitudes on Retirement Security, Part 2

Solving pension challenges has not been easy in other states

Latinos falling behind other Americans in retirement preparedness, research shows

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