To Retire or Not to Retire: Will Pension Plans Keep Their Promise When the Time Comes?

Of the many retirement savings options available, defined benefit pension plans were once a retirement income staple. Due to the highs and lows of the economic cycle, defined benefit pension plans have become severely underfunded. A series of inadequate contributions, enabled by weak funding and risk management policies, poses uncertainty for the retirement of many. The cost of paying pension benefits rises as defined benefit pension plans become increasingly underfunded, burdening the employers who continue to pay them. However, without increasing these already unaffordable pension benefits alongside inflation, they become less valuable to retirees. As pension benefits lose their value and the costs of retirement, such as healthcare and assisted living, increase, defined benefit pension plans may not provide the retirement security that was once promised.