Pensions in the United States

Multiple retirement systems

At the same time, the United States has both public and private pension systems. Therefore, often Americans receive three pensions at once: state, corporate and private.

The distribution system in the United States is almost no different from that in other countries: money received from working citizens in the form of pension insurance fees is almost immediately used to pay monthly guaranteed pensions.

The remaining parts of the general system are accumulative in nature. At the same time, civil servants have their own government programs and pension plans, while the private sector can offer its employees completely different conditions.

The US pension system is considered one of the most successful in the world. Its total size as of March 2017 is estimated at about $25 trillion.

Pension contributions

For 2017, although in theory there are two types of funded programs (with defined benefits and defined contributions), in recent years they usually use programs with established contributions. In this case, contributions are financed by the employer and the employee in equal shares.

An employee and employer pay 7.65% of wages to the state pension fund, but only up to the limit of $65.4 per year. The self-employed pay all 15.3% at once.

Pension Benefit Guarantee Corporation

In the United States, there is the Pension Benefit Guarantee Corporation (PBGC), which is designed to provide pensions from failure.

Nevertheless, it was created back in 1974 as part of a number of financial reforms and is far from an ideal solution. First of all, because it is funded by bonuses of "sponsors" of pension plans, as well as by assets seized from those funds that went bankrupt.

But it only works if the US has a small number of troubled pension funds. What happens when there are tens and hundreds of them?

The PBGC guarantees a relatively small certain amount, which is clearly below the full pension. Earlier, members of the Pension Fund of road carriers have already faced this when they began to receive $570 instead of $1313 per month. This, of course, is better than zero, but still does not allow you to live normally.

Yes, there is a generation of baby boomers who can afford an annual Caribbean cruise, but senior retirees for 2017 are mostly low-income.

2023: Average retirement account rises to $107.7K

Americans are increasingly using their retirement savings to pay housing and health care bills amid rising living costs, according to Fidelity Investments in November 2023. About 2.3% employees in the third quarter of 2023 took advantage of "difficult conditions," compared to 1.8% a year earlier.

2022: US authorities allocate $36 billion to save Teamster pension fund

In December 2022, it was announced that the US president was allocating almost $36 billion to save Teamster, one of the largest and most problematic pension funds that manages the savings of 357,000 workers and pensioners. Without federal assistance, Teamster members would have lost 60% of their regular retirement payments on average in a couple of years.

The money comes from the American Rescue Plan, a $1.9 trillion fiscal support package approved by law in 2021. The program has already provided assistance to 36 troubled pension funds (550 thousand pensions and almost 2,000 employers), but none of them received more than $1.2 billion at a time. In total, there are more than 200 problem funds, and the planned amount of assistance is estimated at $90 billion.

2020: Average retirement age is 65

Average retirement age in some countries around the world in 2020

2017: Pension plans at risk of collapse

As of March 2017, pension funds that provide a comfortable and happy old age for Americans cannot pay what they owe. Nearly 1 million working and retired Americans have faced their retirement plans at risk of collapse, according to the latest research.

At the same time, there is no dependence on geography or economic status. For example, members of the South Carolina state government pension plan faced problems, which is approximately 550 thousand former government employees. These people, apparently, lost about $24.1 billion.

Blue-collar workers have similar problems, including about 100 thousand miners, whose funds owe $6 billion in the United United Workers of America plan.

On the other hand, so far we are not talking about the fact that future pensioners will not receive money at all. They will receive a pension, but most likely less than they expected. The managers of these pension plans could not work effectively in the changed market conditions, and, as it turned out, there is almost no protection against losses.

In addition, the failure of the pension system, when people can no longer believe in it, will also negatively affect the entire banking sector, as confidence in the financial system will collapse. And this could be the article's impetus for the world's biggest crisis.

But such a risk can only be realized in a few years if the authorities do not come up with a mechanism for saving pensions. In the meantime, pensioners face a harsh reality.

2015: Median household income over 75 $34.097

According to a 2015 report by the Bureau of Labor Statistics, the average income of households over 75 was $34.097 thousand, and this is a very small amount of income for the United States. At the same time, average expenses amounted to $34.382 thousand.

So it's no exaggeration to say that even modest cuts to retirement income make a typical 75-year-old pensioner's budget unsustainable.

Even the average budget allows you to lead a rather modest life, and with its reduction, pensioners will have to make ends meet, because they can no longer work, and there are simply no other sources of income.

2013: Risk of pension defaults

According to analysts for August 2013, cities such as Chicago and Santa Fe (New Mexico) have worryingly high pension liabilities compared to their income. Among American cities with high pension costs, Moody's singles out Santa Fe (New Mexico), which has net pension liabilities six times its operating income, the worst of any city.

This is followed by Virginia (Minnesota), where this excess is 5.9 times. Las Vegas (New Mexico) is in third place with an excess of 5.5 times, while Chicago is in fourth place with an indicator of 5.4. Moody's Investor Services downgraded Chicago's credit rating by three points to A3 and Cincinnati to Aa2 due to rising pension costs. Like Detroit, Chicago faced a population decline of 7 percent from 2000 to 2010, but these are still flowers, compared to Detroit's catastrophic 25 percent population decline over the same time period.

See also

• Pensions in Russia
• US economy