Retirement Wealth Flatlines with Move from Pensions to 401(k) Plans

As more employers moved workers from pension to 401(k) plans between 1992 and 2010, total retirement wealth stayed flat. Not surprisingly, the highest retirement savings are concentrated among those with greater education, according to a study by the Center for Retirement Research at Boston College.

The study found the mean retirement wealth for households ages 51-56 with a defined benefit plan fell from $242,540 in 1992 (in 2010 dollars) to $237,814 in 2010. Meanwhile, the mean retirement wealth of similar households with defined contribution plans nearly doubled, from $123,877 in 1992 to $216,855 in 2010. This likely reflects the fact that defined benefit pension plans are more common among workers in industrial, trade or union jobs. Professional or skilled employees are more likely to have a defined contribution plan.


Defined benefit plans specify the amount of money an employee will receive at retirement, usually based the number of years of employment.

Defined contribution plans specify the amount of money set aside each year by the employer; how much the employee receives at retirement depends on the amount of the contributions, investment outcomes and rules of the plan.


For suggestions on creating a retirement plan that best fits your employees’ needs, please contact USI Northeast.

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