When markets are calm, it can be easy to forget how fragile retirement security has become for millions of Americans. But in periods of economic uncertainty, the weaknesses of a retirement system that depends heavily on individual savings accounts become impossible to ignore.
Today’s economy is giving workers and retirees plenty to worry about. Inflation remains elevated, with the Consumer Price Index rising 3.8 percent over the 12 months ending in April 2026. Energy prices rose 17.9 percent over that same period, gasoline jumped 28.4 percent, and food prices increased 3.2 percent. For families already stretched by housing, health care, and everyday expenses, these rising costs make it harder to save for retirement and harder to live on a fixed income once retired.
At the same time, financial markets remain vulnerable to shocks. In its May 2026 Financial Stability Report, the Federal Reserve noted that low market liquidity can amplify asset-price volatility, while increased volatility can further reduce liquidity. The Fed also pointed to periods of heightened interest-rate volatility tied to geopolitical risk, especially in Treasury markets.
For workers whose retirement future depends largely on a 401(k)-style account, this kind of volatility is not abstract. It can determine whether someone retires on time, delays retirement, reduces their standard of living, or outlives their savings.
That is why defined benefit pensions matter more during uncertain economic times.
401(k)s Leave Workers Exposed to the Worst Timing
A 401(k) can be a useful savings tool, but it was never designed to carry the full weight of retirement security. The problem is that workers are increasingly expected to manage risks that no individual can fully control: market downturns, inflation, interest rates, longevity, healthcare costs, and the timing of retirement.
Dan Doonan, executive director of the National Institute on Retirement Security, put it plainly in 2024 testimony before the U.S. Senate: “401(k)s just can’t do the job designed for a pension.” He noted that Americans are best positioned for retirement when they have the traditional “three-legged stool”: Social Security, individual savings, and a defined benefit pension.
Market timing is one of the biggest reasons why 401(k) savings are inadequate. A worker who experiences a downturn early in their career may have decades to recover. A worker who experiences that same downturn right before retirement may not. Selling investments during a market decline to cover living expenses can permanently reduce retirement income. This is often called sequence-of-returns risk, and it is one of the clearest examples of why retirement security should not depend solely on individual account balances.
Doonan’s testimony also highlighted this reality, noting that the difference between retiring in 1999 and 2009 could not simply be solved through better asset allocation because the external market conditions were so different.
In other words, two workers can do everything “right” and still end up with very different outcomes depending on when the market turns against them.
Pensions Provide Stability When Families Need It Most
Defined benefit pensions work differently. Instead of leaving each worker to navigate market swings alone, pensions pool risk across large groups of workers and retirees. They are professionally managed, invested over long time horizons, and designed to provide predictable lifetime income.
That structure matters during volatile markets. Pensions are not immune to economic downturns, but they are built to weather them. Unlike an individual 401(k), a pension plan does not depend on one person’s retirement date, one person’s investment choices, or one person’s ability to guess how long they will live.
The Center for American Progress summarized this advantage during the Great Recession, noting that defined benefit plans are designed to weather volatile markets because they provide better time diversification of financial-market risks than 401(k) plans.
That is the core strength of pensions: they turn uncertainty into reliability. A pension gives retired teachers, firefighters, nurses, sanitation workers, and other public employees a monthly benefit they can count on, even when the stock market is swinging or inflation is eating away at household budgets.
Current Retirement Confidence Data Shows the Stakes
The retirement anxiety Americans feel today is backed by data. According to the 2026 Retirement Confidence Survey from the Employee Benefit Research Institute and Greenwald Research, only 64 percent of Americans say they feel confident they will have enough money to live comfortably throughout retirement. Worker confidence fell to 61 percent, while retiree confidence fell to 73 percent.
The same survey found that inflation, debt, health care costs, housing expenses, and concerns about possible changes to the retirement system are weighing on both workers and retirees. Craig Copeland, EBRI’s director of wealth benefits research, said, “Retirement confidence has clearly softened this year,” citing immediate financial pressures and long-term uncertainty.
The survey also found that 65 percent of workers say debt is a problem for their household, nearly 6 in 10 workers say health care costs are hurting their ability to save for retirement, and 7 in 10 workers are concerned that rising housing costs will affect their retirement.
These findings make one thing clear: workers do not need more retirement risk. They need more retirement security.
Pensions Help Protect Workers From Outliving Their Savings
One of the most difficult parts of planning for retirement is that no one knows how long they will live. A worker relying mostly on a 401(k) must decide how much to withdraw each year while trying to account for inflation, health care costs, market performance, and longevity. Withdraw too much, and they risk running out of money. Withdraw too little, and they may spend retirement living with unnecessary financial fear.
A defined benefit pension addresses that problem by providing income for life.
This is especially important as many workers expect to work longer, even though many retirees leave the workforce earlier than planned. EBRI’s 2026 Retirement Confidence Survey found that nearly 4 in 10 workers expect to retire at age 70 or older or not at all, while only 10 percent of retirees actually did so. The survey also found that 46 percent of retirees left the workforce earlier than planned, often because of hardship, health issues, disability, or workplace changes.
That gap matters. Telling workers to simply “work longer” is not a retirement plan. Many people do not get to choose the exact timing of retirement. Pensions help protect workers when life, health, or the economy disrupts those plans.
Pensions Strengthen Local Economies
Pensions do more than support individual retirees. They also stabilize communities.
NIRS’ Pensionomics 2025 report found that in 2022, $680.6 billion in pension benefits were paid to 26.3 million retired Americans. Retiree spending from those benefits supported $1.5 trillion in total economic output, 7.1 million jobs, $466.2 billion in labor income, and $224.3 billion in federal, state, and local tax revenue.
That spending has a powerful multiplier effect. NIRS found that every dollar paid in pension benefits supported $2.28 in total economic output nationally, and every taxpayer dollar contributed to state and local pensions supported $7.79 in total output.
This is especially important during economic downturns. When markets fall, or consumer confidence weakens, pension checks keep arriving. Retirees continue buying groceries, paying utility bills, filling prescriptions, supporting local restaurants, and contributing to their communities. Pension income acts as an economic stabilizer because it is steady, predictable, and spent locally.
Pensions Are Also a Workforce Tool
Market volatility does not only affect retirees. It also affects employers trying to recruit and retain workers.
Public employers are already facing serious workforce challenges in education, public safety, health care, and public services. When workers see rising costs, uncertain markets, and growing retirement anxiety, a pension becomes a powerful reason to enter and remain in public service.
NIRS’ Retirement Insecurity 2024 report showed that 57 percent of workers would be more likely to choose a job offering a traditional pension over a similar job offering a 401(k)-style plan. The same report also found that 90 percent of workers with a pension say it makes them more likely to stay in their job, while 87 percent of workers without a pension said they would be more likely to stay longer if their employer provided one.
That matters for taxpayers and communities. High turnover is costly, and vacancies strain public services. A strong pension helps employers keep experienced public workers on the job.
Market Volatility Is a Reminder, Not an Argument Against Pensions
Opponents of pensions often point to market volatility as a reason to weaken or replace them. But that argument gets the issue backward.
Volatility is exactly why pensions are needed.
When markets are unpredictable, individual workers should not be left to shoulder all the risk alone. When inflation rises, retirees need a dependable income. When workers are worried about whether they will ever be able to retire, employers need benefits that provide real security. When communities face economic uncertainty, steady pension spending helps support local businesses and public revenues.
Defined benefit pensions are not outdated. They are one of the few parts of the retirement system designed around the reality that markets rise and fall, people live longer than expected, and workers need more than hope to retire with dignity.
A secure retirement should not depend on whether someone happens to retire during a bull market or a downturn. It should not depend on whether they can predict inflation, interest rates, health costs, or life expectancy. And it should not force public workers who spent their careers serving their communities to gamble their future on Wall Street.
Market volatility makes the case for pensions stronger. In an uncertain economy, pensions provide what workers, retirees, employers, and communities need most: stability.