The U.S. Retirement System U.S. Department of Labor Employee Benefits Security Administration

1935: workers employed in industry and commerce. 1939: dependents and survivors. 1950s-1980s: more sectors (farm, domestic, self employed, military, some state/local, non-profit, clergy, federal civilian, Americans abroad). Also added benefits for disabled workers. Established in 1935 as a response to the high rate of elderly poverty during the Great Depression. Coverage was expanded over time.

Mandatory Covers everyone (almost) Pay-As-You-Go Provides lifelong income support But funding will fall short

Taxes $672 Billion Benefits $615 Billion 162 million workers 51 million beneficiaries

How Large is the Benefit?

Funding Will Fall Short Taxes in Benefits out

Voluntary Pre-funded Numerous Wide variety

Pensions are Voluntary

Pensions are Pre-Funded

Major Plan Types Defined Benefit Defined Contribution

$ Varies $ Defined Company Retirees

$ Defined $ Varies Company Exiting Employees

Private Employee Pensions Now Mostly Defined Contribution Defined benefit

Private Employee Pensions Mostly Defined Contribution

Voluntary, recently low Highly concentrated among the affluent Many ways to save Tax advantages

Saving Rate has Fallen

Saving is Concentrated Median Amount of: Financial Assets Net Worth Bottom 20%$2,000$8,000 All Families$29,000$120,000 Top 10%$405,000$1,119,000

Many Ways to Save