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Americans Miss Their Pensions

Americans Miss Their Pensions

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Nearly 80% of Americans feel the nation is facing a “retirement crisis”, according to a study by the National Institute on Retirement Security (NIRS). That’s a lot of people, but more importantly, it’s up from just two-thirds in 2020.

Retirement is an ever-important topic for people. Questions about how much to contribute and tax-efficient ways to save reign, not to mention the shame some people feel about not having contributed enough early in their careers. But respondents to the NIRS study agreed on one bright spot when it comes to retirement planning: Pensions.

Pensions vs. 401(k)s

More than 3 in 4 Americans believe pensions help lead to a more secure retirement, per the study.Both 401(k)s and pension plans offer ways to save for retirement, but there’s a key difference: With a 401(k) plan, workers contribute a portion of their paycheck to a tax-deferred account. Many companies also offer a match, increasing the contributions. Meanwhile, the responsibility to set money aside solely falls on the employer in the pensions model. The company invests funds on behalf of the beneficiary and pays out a set income after retirement. You might also hear this difference referred to as defined-contribution versus defined-benefit plans.

Pension Push

It’s not just survey respondents who want pensions back. During last year’s labor strikes, unions like the United Auto Workers pushed for pension plans in the new deals. Ultimately, the UAW’s demand was denied, suggesting that companies don’t share the appetite to go back to the pensions model, which is considered more expensive for the employer.

Even so, some companies are going back. IBM (IBM) recently began offering pensions again after shuttering its legacy pension plan for nearly two decades, joining the likes of John Deere (DE) and Coca-Cola (KO), which still offer pension plans as well.

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