The Changing Face of Private Retirement Plans

Abstract

This Issue Brief examines the changes in private pension plan participation for defined benefit and defined contribution plans and the impact of these changes on the sources of retirement income. The Employee Benefit Research Institute's Retirement Income Projection Model is used to quantify how much the importance of individual account plans is expected to increase because of these changes. The report compares results of the model by gender for cohorts born between 1936 and 1964 in order to estimate the percentage of retirees' retirement wealth that will be derived from defined benefit plans versus defined contribution plans and individual retirement accounts (IRAs) over the next three decades. Under the model's baseline assumptions, both males and females are found to have an appreciable drop in the percentage of private retirement income that is attributable to defined benefit plans (other than cash balance plans). In addition, results show a clear increase in the amount of retirement assets that retirees will have to manage themselves.

Keywords: Asset allocation, Defined benefit plans, Defined contribution plans, Employment-based benefits, Individual retirement accounts, Pension plan assets, Pension plan participation, Retirement income

JEL Classification: D31, J32