Industry News

On January 10, 2019, the National Institute on Retirement Security released its updated report, Pensionomics 2018: Measuring the Economic Impact of Defined Benefit Pension Expenditures. The biennial study finds that public and private pension benefits offer significant support for the U.S. economy.

According to the study, each dollar of benefit paid to retirees supported $2.13 of the total U.S. economic output.  In addition, these pension benefits help to support the economy and as well as jobs where retirees reside since those with monthly pension income continue spending on basic needs even during economic downturns.

During the fiscal year ending in 2016, the study reports:

• Public and private pension plans provided about $578.0 billion in benefits to about 26.9 million retirees and beneficiaries.  Of this amount, $294.7 billion was paid to 10.7 million state and local government retirees and beneficiaries; $83.0 billion was paid to 2.7 million federal government beneficiaries; and $200.3 billion was paid to 13.5 million private sector beneficiaries;
• These benefits supported more than $1.2 trillion in the total U.S. economic output and provided an estimated $685.0 billion in value added to the national economy; and
• This, in turn, supported approximately 7.5 million American jobs paying more than $386.7 billion in total compensation, as well as $202.6 billion in annual federal, state, and local tax revenues.  The largest employment impacts were in retail trade, health care, real estate, and food service industries.

The study also finds that over the period from 1993 to 2016, government (i.e., taxpayer) contributions to public pension plans averaged 25.1% of the total annual plan receipts, with the remainder coming from investment earnings (63.3%) and employee contributions (11.6%).  As a result, the study estimates that every dollar contributed by taxpayers to public pension funds supports an estimated $8.48 in total economic output.

According to the report, “reliable pension income can be especially important not only in providing retirees with peace of mind, but in stabilizing local economies during economic downturns. Retirees with DB pensions know they are receiving a steady check despite economic conditions. In contrast, retirees may be reluctant to spend out of their 401(k)-type accounts if their savings are negatively impacted by market downturns.”

The analysis was conducted using data from the U.S. Census Bureau and input-output modeling software (IMPLAN) to assess the economic impact.  In addition to providing national estimates of economic activity, the report also estimates the economic impact of public pensions in all 50 states and provides fact sheets for each state. 

The report is available here.

A map with downloadable fact sheets for each state is available here.