For most retired Americans, many of whom retired as long ago as the last century, guaranteed income still covers more than half of their total monthly spending.
Source: Retirees relying on 401(k) income face retirement challenges
(Also see the two posts on over saving for retirement, in the right most column of this page.)
But those retiring more recently did not have access to pensions – and have had to save for their own retirement.
This is a big change – pensions gave way to IRA and 401(k) retirement savings programs. Newer retirees must now manage their resources carefully to live out their lives.
Whether you have a pension – or did not – influences your approach to life well before retirement. As someone without pension or health care coverage, I became an excessive saver and investor, did my own car and home repairs, did no global travel, and rarely went out to eat at a restaurant (as a few examples).
By comparison, I know some who had guaranteed future pensions who felt money is for spending and did not do intensive saving. Instead, they enjoyed life because their future retirement included good pensions and partially funded health care in retirement. They did not need to save for the future with the intensity of others and felt comfortable spending on luxuries (travel, going out to eat, hobbies, etc). (We also see this in countries, such as Denmark – where personal savings are very low – because of a high retirement pension program.)
More than a decade ago, a newspaper in my state compared public sector employment and compensation with private sector employment. The paper found that pay scales were quite similar – with just two major differences:
- Public sector workers had pension programs and most private sector workers do not have pension programs.
- Public sector workers had job security: Private sector workers were far more likely to be let go for layoffs or fired for non-performance.
The report said the value of the public sector pension for the “average” worker (and this is more than a decade ago) was equal to a private sector worker having saved about $1.6 million at time of retirement.
The report looked at public sector pension programs in 3 states and found the value of their future pension payouts at retirement age ran between $1.4 to $1.6 million, depending on the state. A private sector worker would have had to set aside, typically, about $1.6 million to fund equivalent benefits during retirement.
(I tried to find that old news report but was unable to locate it.)
