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Projected Sources of Retirement Incomes under the Baseline and UK Scenarios Among the first wave of boomers, 85 percent are expected to have income from financial assets and 48 percent will have earnings, either their own or their spouse’s (table 2). Only 3 percent of individuals are projected to receive SSI benefits, but 85 percent will have imputed rental income from homeownership and 94 percent will receive Social Security benefits. Under the baseline, 50 percent of first wave boomers are projected to have family DB pension benefits and 76 percent are projected to have retirement accounts. Pension coverage does not change under the UK scenario for first wave boomers because no one who had DB coverage before the freeze loses their coverage (though, as we show below, their benefits are reduced), and because first wave boomers are near or at retirement age and are less likely than younger workers to take up DC pensions when newly offered. Compared with the first wave of boomers, the last wave of boomers are equally likely to have income from assets (86 versus 85 percent), but less likely to have earnings (42 versus 48 percent). Under the baseline, last wave boomers are 6 percentage points less likely than first wave boomers to have DB pension benefits (compare 44 with 50 percent), but are equally likely to have retirement accounts (compare 77 with 76 percent). The UK scenario accelerates the shift from DB to DC pensions, reducing the share of last wave boomers with DB pensions by an additional 2 percentage points and increasing the share with retirement accounts by 2 percentage points, compared with the baseline. Freezing more DB plans does not cause many boomers to lose DB coverage because all workers with existing DB plans retain them, even though they stop accruing benefits, and some workers who are not vested gain coverage. Only workers with no previous DB coverage who take new jobs subject to a simulated hard freeze under the UK scenario have DB coverage in the baseline, but not under the UK scenario. The UK scenario also The Disappearing Defined Benefit Pension 18
increases the numbers with DC coverage only slightly because many of the affected workers already had DC coverage from their prior or current job. Under the baseline, average per capita family DB pension benefits are projected to decline over time from $5,100 for first wave boomers to $3,000 for last wave boomers, while income from retirement accounts is projected to increase over time from $6,200 for first wave boomers to $7,700 for last wave boomers (table 3). For boomers in the first wave, average per capita family DB pension benefits are expected to be only about $200 lower under the UK scenario than under the baseline, and average income from retirement accounts increases by less than $100. For boomers in the last wave, average per capita family DB pension benefits are expected to be about $1,100 lower under the UK scenario than under the baseline, and average income from retirement accounts is projected to be about $300 more. Over time, the decline in DB pension benefits and the increase in income from retirement accounts is greater under the UK scenario than under the baseline. Furthermore, under both scenarios, the decline in DB benefits is greater than the increase in income from retirement accounts. As a result, per capita family income at age 67 is about $100 lower for first wave boomers and about $700 lower for last wave boomers under the UK scenario than under the baseline. On average, the additional income from retirement accounts under the UK scenario replaces only part of the lost income from DB pensions. This is largely because the pension freezes deprive boomers, especially those in the last wave, of their high accrual years for DB pension wealth and the replacement DC plan does not generate assets large enough to replace the lost DB wealth. 19 The Retirement Policy Program
Page 1 and 2: The Disappearing Defined Benefit Pe
Page 3: The Retirement Policy Program A cro
Page 6 and 7: Tables 1. Projected Characteristics
Page 9 and 10: Abstract The long-term shift in cov
Page 11 and 12: Key findings include the following:
Page 13 and 14: Introduction The percentage of work
Page 15 and 16: Traditional DB plans provide worker
Page 17 and 18: from retirement plans have accelera
Page 19 and 20: the retirement income of future boo
Page 21 and 22: for stocks and 2.14 percent for bon
Page 23 and 24: from DB pension income to DC assets
Page 25: elatively few years to boost their
Page 29 and 30: Who Are the Winners and Losers? The
Page 31 and 32: workers who are affected by DB pens
Page 33 and 34: etirement wealth under the baseline
Page 35 and 36: etirees among formerly better off r
Page 37 and 38: References AARP. 2007. Enhancing 40
Page 39 and 40: 50 45 40 Figure 1. Percent of Last
Page 41 and 42: Table 1. Projected Characteristics
Page 43 and 44: Table 3. Mean Family Income Per Per
Page 45 and 46: Table 5. Mean Family Income Per Per
Page 47 and 48: Table 7. Percent of Individuals Who
Page 49 and 50: Table 9. Change in Mean Family Inco
Page 51 and 52: Appendix A MINT begins with pooled
Page 53 and 54: the first year of benefit take-up.
Page 55 and 56: from DC accounts on an equivalent s
Page 57 and 58: Table B2. Percent of Individuals Wh

Working Paper - Urban Institute

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