The following are some statistics gathered from a survey article on pensions appearing in the April 9th, 2011 edition of The Economist.
- $1.2 Million — Amount a couple would have to contribute over their working life to match the maximum drawable from Social Security ($4,692 per month).
- Supporting the Retirees
7.2 — Number of people aged 20-64 supporting each pensioner in 1950
4.1 — Number of people aged 20-64 supporting each pension today
2.1 — Number of people aged 20-64 who will be supporting each pensioner in 2050! - What sort of retirement plan
62% — Percent of workforce on Defined Benefit (DB) plans in 1976
7% — Percent of workforce on DB plans in 2009
16% — Percent of workforce on Defined Contribution (DC) plans in1976
67% — Percent of workforce on DC plans in 2009 - Employer’s Cost:
For a DB plan — 20-25%
For a DC plan — 9-10% - But — Retirement Funds
Typical invested funds for 60 year olds — $200,000
What is needed to retire comfortably? — $750,000 - In Australia, it is compulsory that employers contribute 9% of payroll to DC plans
- In Britain, it is compulsory that pensioners convert a portion of their DC plans into annuities
- In South Africa, 70% of the retirees with DC funds will spend it all!
- So you think a public sector pension is guaranteed?
Pritchard, Alabama — went bankrupt and DID NOT PAY PENSIONERS
Los Angeles — currently pays 18% of it’s budget to fund DB plans. It will rise to 37% by 2015!
NY City’s contributions to teachers fund will have to rise from $900 million to $4.5 billion!!!
Hawaii’s underfunding of retirement benefits equates to 16.2% of GDP
13 states have underfunding ratios that exceed 10% of GDP - Transparency
DC plans — it is clear who gets what and what it costs the employer
DB plans — based on final salary levels, projected decades in advance, with assumed rates of return on investments - Life expectancy beyond 65
1940 — 12 years
2008 — 18 years - Retirement and Life expectancy
1880s — First Social Security program, introduced in Germany, retirement was 62 and life expectancy 47 years
1930s — US Social Security introduced, retirement was 62 and life expectancy was 60
Today — Retirement typically around 62, with life expectancy till 80.
Do the math.
How do we solve this riddle?
