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[IWS] EBRI: COMPARING TRADITIONAL PENSIONS AND 401(K)S? IT'S COMPLICATED [18 December 2013]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
Employee Benefit Research Institute (EBRI)
EBRI NOTES, December 2013, vol. 34, no. 12
How Much Would it Take? Achieving Retirement Income Equivalency between Final-Average-Pay Defined Benefit Plan Accruals and Voluntary Enrollment 401(k) Plans in the Private Sector
[full-text, 15 pages]
•Previous EBRI research reported on a comparative analysis of future benefits from private-sector, voluntary enrollment (VE) 401(k) plans and stylized, final-average-pay defined benefit (DB) plans.
•Rather than trying to reflect the real-world variation in DB accruals, the baseline analysis used the median accrual rate in the sample (1.5 percent of final compensation per year of participation) as the stylized value for the baseline counterfactual simulations.
•The current research expands the previous research by computing that actual final-average DB accrual that would be required to provide an equal amount of retirement income at age 65 as would be produced by the annuitized value of the projected sum of the 401(k) and IRA rollover balances.
Press Release 18 December 2013
Comparing Traditional Pensions and 401(k)s? It's Complicated.
As the EBRI report explains, an objective comparison of the two plan types is extremely
complicated because of:
The major structural differences between them and how they function.
Extreme variations in the respective job tenure of American workers.
The various factors that can affect each plan differently, such as investment market returns and annuity purchase prices.
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