Can the pension that Americans love come back?

A new study in the United States shows that most people believe that traditional pensions are more conducive to achieving a safe retirement life than modern private pensions. In the past half century, private pension plans such as 401 (k) and IRA have gradually replaced pensions as the main tool for retirement savings for most Americans, but this does not mean that pensions are not popular.

Firstly, most Americans view pensions as a symbol of the American Dream. According to a survey conducted by the National Institute of Retirement Security, a non-profit organization, covering 1208 adults in October 2023, the disappearance of traditional pensions has made it more difficult for workers to achieve the American Dream, with over three-quarters of respondents agreeing. More than two-thirds of the respondents believe that pensions are more helpful for workers to achieve a safe retirement life than 401 (k) plans, as traditional pensions typically provide monthly guaranteed benefits for retirees that last until their death. In contrast, 401 (k) provides employees with a way to establish their retirement savings, but most retirees spend this money faster after retirement.

Secondly, for modern job seekers, pensions have a nostalgic appeal. Many people believe that pension is the gold standard for retirement benefits. Over the years, private companies have gradually shifted from pensions to 401 (k) plans, which are usually more cost-effective and bring much less risk to the company. However, in fact, 401 (k) has shifted most of the risks to workers. David John, Senior Strategic Policy Advisor at the Public Policy Research Institute of the American Association of Retired Persons, said, "The beauty of traditional pensions is that I work, and I don't actually have to deal with any investment returns. Then when I retire, besides social security, I basically get retirement pay."

At present, pensions may become popular again, but they also face some obstacles. Two events in 2023 have sparked enthusiasm for the possible resurgence of pension funds. The strike by car workers demanding the return of some workers' traditional pensions has made headlines, and although they have not successfully recovered their pensions, this bold demand demonstrates the enduring appeal of pensions. In addition, IBM announced the restoration of fixed benefits for American workers, similar to traditional pension plans. However, IBM has been criticized for its new retirement plan, with critics claiming that canceling 401 (k) matching funds would deprive employees of the motivation to increase savings and deprive them of control over retirement fund investments. However, retired experts do not believe that more companies will restore traditional pensions.

However, although pensions are popular, they are not perfect. According to experts, the golden age of pensions is more of a myth than a fact. Andrew Biggs, a senior researcher at the American Enterprise Research Institute, said that in the 1970s, about two-fifths of the private workforce participated in pension plans, but in fact, most people never participated in pension plans, and even if they did, they may not necessarily receive benefits. This is because private employers may require workers to work for 25 or 30 years in order to qualify for pension benefits, and workers who frequently change jobs may never meet the eligibility criteria. In contrast, it takes shorter time for workers to join the 401 (k) plan.

Overall, not all elderly people can enjoy the benefits brought by private pension plans, as many elderly people are unable to participate in 401 (k) and IRA plans due to a lack of stable work and income. Moreover, the retirement pension level available in the United States is relatively low, and many elderly people rely on social security pensions to make a living. However, given the challenges faced by social security pensions, the US government and society should strengthen the protection of elderly people to ensure that their basic living needs are met.