National Institute on Retirement Security's Dan Doonan joined Yahoo Finance to break down the economic benefit of defined benefit pensions.
ADAM SHAPIRO: It's time for our retirement segment, brought to you by Fidelity Investments. And to help us have this discussion, we invite into the stream Dan Doonan, National Institute on Retirement Security. Good to have you here, Dan.
When we talk about retirement, there different aspects of this. There's defined benefits, what I would call a pension-- what most people would call a pension-- defined contributions, 401(k)s, that kind of stuff. Let's start with pensions. Is the system-- so few Americans still have pensions. I think it's less than 10% now in the private sector. But is the system secure? Is the Pension Benefit Guaranty Corporation up to snuff?
DAN DOONAN: Yes, thanks. Thanks for having me. So pensions remain very important, economically, to this country. In 2018, we saw $600 billion in pension benefits paid to almost 24 million Americans, and this supported $1.3 trillion in economic activity and supported almost 7 million jobs.
So I know a lot of employers today ceased offering pensions, or newer employers may have never offered pensions. But we still see a lot of retirees relying on pensions. And you know, protecting the pensions that we have and honoring those obligations, really important to retirees in America.
SEANA SMITH: So Dan, what are you hoping to hear from the Biden administration? What policies do you think need to be implemented, in order to put Americans in a better position for retirement?
DAN DOONAN: Yeah, so first, I think protecting the pensions we have, and I would include in there, prioritizing a solution for multi-employer plans. We know that that issue's been festering and needs a solution. Second, improving 401(k)s so they're more user friendly. Third, strengthening and expanding Social Security and especially take a look at the minimum benefits. I think for retirees and near retirees who haven't saved enough-- if you're interested in reducing poverty for seniors, looking at the minimum benefits is a pretty key way to go about that. And then finally, on long-term care costs, you know, finding a reasonable way to finance long-term care costs is more forward-looking than what we're doing now.
ADAM SHAPIRO: Let's break this down and just very simply. There is a proposal, perhaps, to require a 401(k) or simple IRA to be automatic, that your employer, however it happens, a portion of your paycheck will always go into this, unless you opt out. Is that the way to go?
DAN DOONAN: So I think we know from, you know, the behavioral work that's been done that defaults are really important. I know that more and more plans, and even the state-run savings plans, are looking at defaulting people in but giving them the option to leave. And you see much higher participation rates. So in my view, if you want a retirement system to work well, you want it to be-- you know, you go into the workplace, you sign the papers, you start your job, and you're on a path to saving for retirement, you know, an adequate amount and a good plan.
ADAM SHAPIRO: All right, we appreciate your being here, Dan Doonan, National Institute on Retirement Security. And remember, our retirement segment is brought to you by Fidelity Investments. We appreciate your being here, Dan. All the best to you.
DAN DOONAN: Thank you.