Projected Pension Income: Equality or Disparity for the Baby-Boom Cohort? over Time, Both Eligibility for Pensions and Income from Employer-Sponsored Pension Plans Will Increase for Baby Boomers; Eligibility Rates and Benefit Amounts Are Projected to Be Greater for Late Boomers Overall and, within the Late-Boomer Category, Men, Whites, and the More Educated
Moore, James H., Jr., Monthly Labor Review
The argument that individuals born at different times are faced with different social and economic circumstances is particularly apropos of the baby-boom cohort, a generation that comprises approximately 77 million Americans. Campbell Gibson argues that analyzing this group as a whole does not accurately portray the many social and economic trends embedded within the group, because the boomers are composed of several subgenerations with different behavioral patterns. (1) He suggests that the best way to understand the differences among the boomers is to look at the characteristics of the different boomers when they are at the same age.
Earlier work by John R. Woods applied a method similar to Gibson's to assess pension coverage for both younger and older boomers when they are at the same age. (2) Woods's findings suggest that the younger boomers had a lower rate of coverage between the ages of 27 and 36 years than did the older boomers at those same ages. More recently, Jules Lichtenstein and Ke Bin Wu found that, for both pension coverage on any career job and coverage by an individual retirement account (IRA), younger boomers had less coverage than older boomers when older and younger boomers were at the same age. (3)
Currently, about half of all workers are covered by a pension. As the leading edge of the baby-boom cohort anchors itself for retirement, to what extent will current disparities in pension coverage (4) spill over into retirement? The adequacy of pension coverage for the coming retirement of the baby boomers is a concern for policymakers, who have offered several legislative proposals to bolster participation in pension plans.
To better understand the issues affecting retirement income security, one must look beyond current coverage rates and focus on eligibility rates. (5) This article presents data from the Modeling Income in the Near Term (MINT 3) system to address the question of what is in store for the baby-boom cohort once it reaches age 62. The primary objective is to examine disparities in projected pension eligibility and income among the various baby-boom subgenerations upon reaching 62 years.
The focus of the article does not take other retirement sources into account. Although this approach is a narrow one, it is valuable for two reasons. First, the economic well-being of baby boomers once they retire may be partly dependent on income from an employer-sponsored pension. Hence, employer-sponsored pensions play a vital role in ensuring economic well-being during retirement. Second, if the current pension coverage trend continues, how will it affect the future distribution of pension retirement income? Being able to project future pension eligibility and income is crucial to understanding the economic well-being of future retirees, and policymakers who are able to do so will play a more proactive role in ensuring the income security of those retirees.
Being covered by a pension plan is especially important for a worker who is nearing retirement. Some workers, however, have no such option, especially given that pension eligibility and income have historically been unequally distributed. Previous studies have found that pension coverage and income inequality exist primarily along the lines of age, gender, race, education, and income groups. (6) This article examines these inequalities among the boomers at age 62 by categorizing them into early boomers as opposed to late boomers and by gender, race, income, and education.
As mentioned earlier, the focus of the research is narrowly defined, concentrating only on pensions--one-third of the "three-legged stool" of Social Security income, private savings, and pensions. Even with this narrow approach, however, the question of income security among boomers can be addressed effectively, because income from a pension accounts for an important share of household retirement income.
As regards employer-sponsored pension eligibility (7) and income, about half of the boomers will be eligible for a pension benefit, regardless of the year in which they were born. …