Labor & Economic News Blog


Monday, February 02, 2009

The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of Boomers

The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of Boomers

Over the last three decades there has been a steady shift from DB to DC pensions. The Pension Protection Act of 2006 may accelerate this trend. This paper examines the impact of an accelerated freeze on the retirement income of boomers. Simulations suggest that such a scenario would produce more losers than winners and reduce average retirement incomes. Income changes will be substantial among high-income workers, who have the highest DB coverage and pension incomes. Late boomers will experience the largest impacts, as they lose their high DB accrual years and have inadequate time to accumulate DC wealth before retirement.

 



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