Baby boomers and the transition from DB to DC: reactions vary

The shift from defined benefit to defined contribution plans affects different generations in different ways. A recent blog entry takes a look at one generation in particular and their views on the trend.

The baby boom generation, whose members were born roughly between 1945 and 1964, is perhaps the most affected, since their parents were more largely served by pension plans, while they were new or firmly on the labor market when moving from pension plans to DC plans. took hold.

In fact, a recent entry in the Squared Away blog run by the Boston College Center for Retirement Research notes that nearly two-thirds of parents of baby boomers had pensions, while “a paltry 6%” of those born in end of Baby Boom might say that. Center statistics show that the last time even 20% of employees were covered by a pension plan was in 1955.

The Boomer generation being something of a bridge has resulted in disparities among its members, the blog notes. For example, he cites the reaction of a member of this generation to a recent article that looked at the withdrawal habits of retirees who have pensions. The 67-year-old respondent testified that she had never worked anywhere that offered a pension and that, although she had to rely on her savings, social security and home equity, she has a cousin seven years younger who has a pension and is retiring early. .

One of the price tags of CD plans is that their holders are responsible for deciding how to handle the balance drawdown, an aspect of the system whose wisdom some experts question. But the growing prevalence of defined contribution plans is not entirely at risk, others observe. For example, another respondent to the article said DC plans allow him and his wife to amass retirement savings that his parents “couldn’t have dreamed of.”

Yet the blog warns baby boomers may not remember that another cost of CD plans is having to pay taxes on withdrawals, as well as the requirement that they make withdrawals before reaching a certain age. And it suggests that they adopt a strategy that will improve their financial security in retirement.

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