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"Over 24 million American retirees receive benefits from pension plans. In 2014, they received over a half trillion dollars in benefit payments in that year,” says Diane Oakley, executive director for the National Institute on Retirement Security.
Pretty staggering number and I expect this the rate will go up as more Boomers reach retirement.
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According to NIRS, expenditures by retirees receiving public and private DB pension benefits generated $1.2 trillion in economic output nationwide in 2014.
“Given that our economy at the end of 2014 was a little bit over $17 trillion and consumer spending in the economy generated about $12 trillion of economic activity, what we clearly can see is spending from retirees was about 10% of the consumer-driven economy,” she says.
It would seem that we retirees whether we have pensions or not are an economic force.
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The report also found that retirees who received a pension supported 7.1 million jobs that paid $354.8 billion with their spending habits, which is about half the level of jobs replaced in the economy since the Great Recession ended.
NIRS asserts that for every dollar that retirees spent, $2.21 was generated in total economic output nationally. Each taxpayer dollar contributed to state and local pensions supported $9.19 in total output nationally.
Interesting points on pensions (Defined Benefits).
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Jennifer Brown, author of the NIRS report and manager of research at NIRS, points out that in 2014, the average annual pension benefit was $21,413. Overall, public and private pensions paid out $519.7 billion in benefits in 2014.
Of that, $187.9 billion came from private sector pension plans; $253 billion came from state and local pension plans; and $78.8 billion came from federal pension plans.
Yes the pensions are weighted heavily on state and local pensions there has been a large and getting larger movement towards contributed plans like 401k plans. It is getting easier and easier for those plans to be set up and states now have the ability to put 401k plans out for small businesses to join in. Competition among plan managers is becoming fierce and rates are low. The new laws enacted recently will hopefully keep the ball rolling.
I would expect that retiree spending had always been a significant percentage of the economy. That's not news. While there are more retirees than ever before (so a disproportionate number of non peak earning people), a large percentage of that is spending more, and I would say, much more, than retirees of older times. Even though plenty are living on a shoestring, a shoestring today is more dollars than a shoestring 30 years ago. Plus, all those trillions that were simply SAVED are finally getting released in to the economy. What I am surprised was not mentioned, was what percentage of economic activity DBs provide in the past, when Pensions were more prevalent. Probably lower overall dollars, but more retirees had them. The sub text to me of the article is that the ecomonic growth (overall wage and economic improvements) is far weaker than it appears, BECAUSE a disproportionate amount of it is due to the growing boomer early retiree spending.
Though many bemoan the "failure" of the 401k plan as a replacement for DB pensions, the facts remain that more people have indeed saved more dollars (gross) for retirement than ever before. The problem is that more people than ever before are living longer, retiring earlier, and living at a level far above what retirees of old did. So the more dollars saved may not adequately cover all their costs until they die, but mainly because they ARE spending it, and many are living at or just slightly below the same levels they did while working; something that most all retirees of older generations did not do.
The article appears intentionally neutral about whether the percentage of retirees spending as a part of ecomonic activity is a positive or negative, except that without it, the economy would be in far worse shape.
Last edited by Perryinva; 09-24-2016 at 06:33 AM..
Retirees hire more people to perform services overall. More retirees are relocating than before. Retirees WITH money are spending more on leisure and travel than ever before. More than they did while working. The real problem I see is that this effect will only be a relative blip because the leading edge of boomer retirees, by shear numbers, that had BOTH DB and DC plans are likely to have a higher gross dollar amount of discrectionary spending than the trailing edge of boomer retirees where DB pensions are mostly gone, and certainly less dollars for subsequent generations where it is even less.
More people than before are being forced to retire earlier than they would have, because they have been unable to get another job. In the past, we didnt see 58 - 65 year olds leaving their company to find another job because for one, the jobs weren't usually there for them, and two, with a DB pension, the loss was too great. They were typically waiting for FRA to coordinate their pension with SS. Couple that with the FAR more prevalent amount of investing by the common man, such that a fair percentage now made much more money from savings on the stock market, etc,nthan they ever could have dreamed of at a bank, enabling more to either retire early (freeing up their jobs) or retiring wealthier (and spending more in early retirement, because they have it to spend) and I can easily see where this would occur early on.
Last edited by Perryinva; 09-24-2016 at 06:42 AM..
This is one dumb idea. Now that we are now longer working and making peak career salaries, we live on less income. How does that boost the economy?
You may be making less than your gross by a large amount but I would say that net retirees do almost as well. Now how does your spending boost the economy? Well for one you are not being a hermit are you? You go out watch movies, eat dinner, shop, travel right? You are not stuffing your SS inside the mattress so you are doing stuff with it.
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Originally Posted by Vision67
^^^ Exactly.
Most retirees I know are not buying more stuff. In fact, most are trying to get rid of stuff.
Furthermore, that "early bird special" restaurant deal for a $5 dinner doesn't do much for the economy.
The one benefit I see is property taxes paid to a school district from a property that generates zero schooling expense.
Getting rid of stuff is one thing but as Perryinva points out they are also using more services. Even on a very small limited income older people use bus service that the younger do not for the most part. That keeps bus and train operators in work. Going to the early bird special puts people in the seats. If there are people eating, more likely other folks will go as well. Property taxes do not go only to schools. In fact I think it is a good percentage of about 20% but 80% of property taxes go to infrastructure like road repair, or storm clean up. Honestly think about the incomes of all retirees in the US. it is a huge pile of money. All of that don't go into a water bottle as change to spend later does it?
You may be making less than your gross by a large amount but I would say that net retirees do almost as well. Now how does your spending boost the economy? Well for one you are not being a hermit are you? You go out watch movies, eat dinner, shop, travel right? You are not stuffing your SS inside the mattress so you are doing stuff with it............
The facts don't back you up. A vast majority of retirees live off of social security and a small amount of savings. A few lucky ones also have some sort of pension but those numbers are way, way down.
Sure we still spend in retirement and cannot be entirely ignored but the amounts are way down from when we worked. If you saved enough and have enough pension to match your pre-retirement income, good for you but you are in a very small minority.
What I don't get is countries that make it difficult for foreigners who can show proof of financial means to acquire long term visas. I'm looking at you Thailand.
People who (usually) don't get into much trouble and spend their cash boosting the economy, while not stealing jobs from locals. What's not to like about that? I would think Thailand would want as many Chinese/American/Russian/Brit expats as possible. Even Vietnam has figured things out, they now offer a one year multi-entry visa to Americans.
What I don't get is countries that make it difficult for foreigners who can show proof of financial means to acquire long term visas. I'm looking at you Thailand.
People who (usually) don't get into much trouble and spend their cash boosting the economy, while not stealing jobs from locals. What's not to like about that? I would think Thailand would want as many Chinese/American/Russian/Brit expats as possible. Even Vietnam has figured things out, they now offer a one year multi-entry visa to Americans.
Absolutely I completely agree. I probably won't spend an extra long time in Thailand but Vietnam sounds terrific. It is as you said they figured it out. Living in Vietnam and enjoying the weather and local history sounds like my kind of place.
How does the declining number of DB Pensions factor into the future? Hopefully the number of State and Federal jobs won't increase to make up the difference.
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