The 2024 Summer Olympic Games are in full swing in Paris, France. Just a week into the games, Simone Biles has become the most decorated Olympic gymnast in history with the U.S. women’s gymnastics team’s gold medal performance. She is just one among the swimmers, divers, cyclists, and other athletes who have demonstrated their hard work and talents on the Olympic stage. Just like the athletes prepare for the games, preparing for retirement takes years of hard work, dedication, and long-term thinking. The evidence is clear: a defined benefit pension is the gold medal winner for retirement security.
Planning for retirement is like a marathon–it’s a long race, and you’ve got to be ready to tackle challenges along the way. It takes years to accumulate the savings needed to retire. Fortunately, one of the key advantages of pensions is that they can invest on an infinite time horizon. This is because pensions are not tied to the lifespan of any one individual. This allows pension funds to maintain an optimal investment portfolio of high- and low-risk investments. If a runner’s pace lags halfway through the marathon, there is still an opportunity to recoup time. If investment returns take a dip at some point, pensions have time to recover when the financial markets improve and returns are stronger.
Like a rowing team working together in unison, pensions pool assets collectively from hundreds or thousands of workers. By combining their assets in the pension fund, workers and employers can weather shocks in the financial markets. When times of financial catastrophe strike, like the Great Recession, an individual invested in a 401(k) could lose their retirement savings in an instant. For pension plan participants, however, their pooled assets can weather the ups and downs, just as a sailing team weathers rough seas in pursuit of their goal.
Athletes who compete and earn medals are Olympic champions forever, and it’s the same way with pensions–once you’ve earned your benefit, it is guaranteed for life. Defined contribution 401(k)-style retirement plans don’t even make it on the podium because they fail to provide working families with a reliable and secure retirement.
Whether you are sprinting for gold in the 100 meters or dutifully contributing to your pension with every paycheck, you know that years of working toward your goal can help you achieve your dream, whether that is Olympic glory or a secure and dignified retirement. To us, the winner is clear: pensions get the gold for providing a secure retirement.