Study: The Disappearing Defined Benefit Pension and its Potential Impact on the Retirement Incomes of Boomers
April 7, 2009
Economic researchers at Boston University have published a study examining the long-term shift in coverage from defined benefit pensions to defined contribution plans, which may accelerate rapidly as more large companies freeze their DB pensions and replace them with new or enhanced DC plans. The study specifically looks at the impact of an accelerated transition from DB to DC pensions on the distribution of retirement income among baby boomers. Income changes will be largest among higher-income boomers, who have the highest DB coverage rates and projected pension incomes. Furthermore, the numbers of winners and losers and net income changes are much greater for the last wave of boomers (born between 1961 and 1965) than for earlier boomers. Younger boomers are most likely to have their DB pensions frozen and to lose their high accrual years for DB pension wealth, but also to have relatively more years to accumulate DC pension wealth before retirement. The full study is found here.