The disappearing pension plan, you are on your own these days

Laborer in bib overalls Digging the fire pit.
Would you believe I am 87?

Most Americans outside of  government never did have a pension to rely on in retirement. Today the situation is dismal.

Since 1998, there has been a steady — yet dramatic — overall shift in retirement offerings to newly hired employees. At the end of 1998, 90 of the Fortune 100 companies offered some sort of defined benefit pension, either a traditional or account-based, (usually cash balance) plan.  Today, only 30 companies offer these pension plans to their new hires.

Offering defined contribution plans (think 401(k) as the sole retirement plan became increasingly common over this period, jumping from only 10 Fortune 100 companies at year-end 1998 to 70 companies in this year’s Fortune 100.

Once upon a time employers valued a long-term, experienced employee and rewarded him with a lifetime pension at the end of a career.  Those days are gone for good. The philosophy today among employers and workers is get what you can for a few years and move on.  Loyalty and long-term reward is a thing of the past for both parties. You can argue whether that is good or bad, but you can’t argue with the fact that the decline and fall of the pension has changed forever the concept of retirement, perhaps eliminating it for many.  Employers used the excuse that workers did not appreciate a pension with an unknown benefit many years in the future and besides starting in the late twentieth century who was going to work for a company for 30 years? The grass is always greener someplace else.  I can tell you as one of those dinosaurs who worked for a company for forty-eight years and who has a good pension, it’s easier to sleep at night than it would be wondering what my 401(k) will look like tomorrow or how much I can withdraw next year without running out of money.

In 1985, 89 Fortune 100 companies offered a traditional DB plan to their newly hired workers, while 11 offered only an account-based plan. Over the past 25 years, the pattern has flipped almost completely. Today, 87 of today’s Fortune 100 companies offer only account-based retirement plans to newly hired workers, while 13 offer traditional DB plans.

Data Source: Towers Watson.

There are many reasons for the demise of the pension plan including; a changing more mobile workforce, government regulation and related costs, volatility and the cost of funding such plans, long-term liabilities, high and growing premiums to the Pension Benefit Guarantee Corporation and because everyone else is no longer doing it, providing a pension is not necessary to attract workers to an employer.

When it comes to retirement income these days, you are pretty much on your own.


  1. Even defined benefit pensions provided by once considered safe municipalities, you might be on your own. “With its pension fund not only underfunded, but completely out of money, Central Falls, R.I., filed for bankruptcy in August.” New York Times
    This may be the future of what is left of defined benefit plans.


    1. Sadly, you may be right. The positive affects of ERISA have worn off and in the case of government plans they simply promised too much and/or were irresponsible in meeting their funding obligations. We easily forget that promises made by anyone must be paid for.


      Richard D Quinn Editor


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