Wealthy retirees are twice as likely as lower-income retirees to cite work-sponsored pension plans as the top source of retirement funds. However, that will change as less employers are offering pension plans, instead preferring plans like 401(k)s.
Wealthy retirees are twice as likely to cite work-sponsored pension plans as the top source of retirement funds while lower-income retirees overwhelmingly name Social Security as their major source, according to a Gallup poll.
“Pension plans appear to be a major factor in determining retirees' standard of living, given that they are the most commonly cited income source among retirees whose annual household income is at or above the U.S. median of roughly $50,000,” according to Gallup.
Gallup suggests that the reason pension plans relate to how financially well off a retiree is might be that those with pension plans may have been working in professions that paid better to begin with. Income differences during retirement are simply a continuation of the income differences present before retirement.
Retirees with incomes below $50,000 heavily depend on Social Security with 73% naming it their major source of retirement funds.
Among all U.S. retirees, 61% cite Social Security as the major source of retirement funds, followed by pension plans (46%). However nonretirees’ expected income sources are very different. Instead, workers expect self-directed savings accounts like 401(k)s or IRAs to be the major source of retirement income.
“The retirement landscape is shifting, as more nonretirees expect to rely on self-directed retirement savings accounts and less on the sources like pensions and Social Security that chiefly provide income for today's retirees,” according to Gallup.
Fewer employees now offer pension plans, instead offering plans like 401(k)s. According to the Gallup results, 24% of nonretirees say a pension plan will be a major source of income compared to 36% of current retirees.
“Pension plans are a way to force employees to save for retirement,” according to Gallup. “Future retirees who lack such a retirement option will need to rely more on their own discipline to ensure that they can make ends meet in retirement, particularly given the financial challenges facing the Social Security and Medicare systems.”