Welcome to October’s first edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Before you dive into our top stories from this week, check out some stories of public employees helping their communities during the coronavirus pandemic.
Here are the top stories from this week:
Texas Has a Problem With Its State Employee Pension Plan by Anthony Randazzo and Jonathan Moody. In this blog post on Medium, Randazzo and Moody of the Equable Institute write about a shortfall facing the Employees Retirement System of Texas (ERS). Their analysis includes several options in addressing this shortfall that would be detrimental to public workers’ retirement security, such as switching newly hired employees to a defined-contribution plan like a 401(k). This measure would harm both employers and employees, as 401(k) plans are more expensive to implement than defined-benefit plans and 401(k)s do not offer the same amount of security in retirement. Furthermore, the authors note that “for a state the size of Texas with its relative wealth and capacity to raise revenue, it is far from obvious that Texas has reached a point where benefit cuts are necessary.” Lawmakers have constantly underfunded the system over time, and they can address this funding gap by closing corporate tax breaks and loopholes. A report from Good Jobs First found that corporate subsidies and tax breaks cost the state of Texas more than $4 billion in 2019, which would’ve been more than enough to fully fund the system’s pension obligation in the same year.
Even the most diligent of savers at risk for not saving enough for retirement: report by Amy Novotney. In this article for McKnight’s Senior Living, Novotney writes about a new report from the National Institute on Retirement Security (NIRS) which shows how costs for everyday necessities are rapidly increasing for older adults. The report found that housing and healthcare costs, in particular, have risen dramatically. Also, in 2016, almost half of seniors experienced mortgage debt, and nursing home costs exceeded$300,000 if a retiree lives in one for three years or more. This illustrates why protecting the hard-earned pensions of public employees is so important, as they can help older adults afford their basic needs in retirement.
Why a Massive Retirement Rush Is Underway by Jeff Bush. Bush writes in this article for Kiplinger about how the coronavirus pandemic is pushing older workers into early retirement. Many workers are retiring early due to fears of contracting the coronavirus on the job, which so far has disproportionately impacted older adults. The pandemic-induced economic crisis is another reason why more workers are retiring earlier than anticipated, as “42% of older workers who lost their jobs say they’ve retired,” Bush writes. This can negatively impact their retirement security, as those who retire early will save less for retirement and their potential Social Security benefits will also be lower when they collect them. Policymakers can help older public employees when they retire by maintaining their defined-benefit pensions, as they provide public employees with a safe, reliable retirement that does not put all the risk on the individual.
Be sure to check back next week for the latest news in the fight for a secure retirement!