Cracks in the System Pensions & Investments (07/02) Vol. 30, No. 15 p.1; Jacobius, Arleen
New research from New York University economics professor Edward N. Wolff reveals that the retirement income of the typical baby boomer fell 11 percent from 1989 to 1998, even as the stock market made remarkable gains. The Economic Policy Institute has published Wolff's study, "Retirement Insecurity," which adds that 43 percent of boomers will not even have half of their pre-retirement income to live on when they retire, and fewer will have enough to stay above the poverty line. Wolff is most concerned about the impact of the switch to a pension system focused on defined contribution plans, compared to one focused on defined benefit plans, although his work addresses retirement plans, Social Security benefits, and personal savings. "Under the new defined contribution plans, employers just put in less money than they did in defined benefits plans," says Wolff. Although defined contribution plans are designed to support retirement plans, Social Security benefits, and personal savings, Wolff adds that pension coverage has slowed to 3.5 percent growth, Social Security income is down 13.4 percent, plans have fallen out of favor, and rank-and-file employees are not the most sophisticated investors. Meanwhile, Urban Institute consultant Cori E. Uccello, who conducted a study for the Center for Retirement Research at Boston College last year, believes most households will have enough money. However, Uccello acknowledges the importance of household savings as Social Security benefits and defined benefit pension income decrease.