The composition of private pensions has changed substantially over the last 30 years. The percentage of workers with a pension has remained relatively constant since the mid 1970’s. The percentage is between 45 and 55%, with approximately 40% of workers in the private sector and 75% of workers in the public sector having pensions. In 1978, over 50% of all private pensions were defined benefits (DB) pensions, which essentially guaranteed a percentage of salary in retirement, if the worker met eligibility requirements, such as a minimum number of years employed with the pension granting firm. Today, fewer than 20% of private sector employees have DB plans and over 80% have some form of a defined contributions (DC) plan, like a 401(k) plan, or other available pension retirement investments.
These pre-funded plans, for which workers and retirees are fully responsible for investment decisions, cover less than half of current workers. Most workers are accumulating less in their accounts than required to support pension payments that, in combination with Social Security, could generate 70-80% of what they earn while working. This is one of the major reasons, along with rising health care costs, that the Boston College Center for Retirement Research has projected declining levels of retirement security for the Baby Boomers and younger workers, especially those born after 1960.