Pension Problems

Report Outline
Pension Bension Benefits Threats
State of Retirement Income
Proposals to Boost Pensions
Special Focus

Pension Bension Benefits Threats

Recent Drop in Coverage by Private Plans

As the deadline for filing federal income tax returns approaches, financial columns are offering their yearly advice on how best to invest in an IRA. The individual retirement account has become a popular vehicle for deferring taxation on current income while squirreling away funds for retirement. IRAs are one of the more recent sources of retirement income that have been made available to Americans over the past half-century.

The issue of retirement income focused in the early 1980s on Social Security and its predicted inability to provide minimum benefits to retirees by the end of the 1990s. However, the Social Security amendments Congress passed in 1983 shored up the system's retirement fund for beneficiaries well into the next century. The concern that was centered on Social Security has now shifted to the integrity of private pension funds. Pensions offered by private employers as well as many state and local governments, were becoming more widely available at the time the Social Security legislation was passed in 1935. The lawmakers expected those pensions, together with individual savings and other personal assets, to provide the bulk of retirement funds.

Encouraged by legislation offering tax deductions for contributions to private pension plans, increasing numbers of employers and government agencies established plans for their employees. By 1950, there were 25,000 pension plans with a total of $13 billion in accumulated assets. Today there are nearly 800,000 plans; they report combined assets of $1.4 trillion, slightly more than three-fourths of it in the pension funds established by private companies. According to a Bureau of Labor Statistics survey, participating workers who retired in 1984 at age 65 from medium-sized and large companies after 30 years of service received between $385 and $886 in monthly-pension payments, in addition to their Social Security benefits.