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In 2010, the poverty rate for elderly households that did not have pension income was nine times greater than for households with pensions, a Thursday report revealed.
The nonprofit National Institute on Retirement Security previously compiled similar data for 2006, when the number of elderly households without pensions and living in poverty was six times that of their pensioned counterparts.
According to Diane Oakley, executive director for NIRS and co-author of the new study, two significant changes occurred after 2006 the financial crisis hit and baby boomers began turning 60.
"We wanted to look at how much the income from defined-benefit plans protects older Americans from poverty and material hardship," Oakley said in a morning teleconference, "and how does it help reduce reliance on public assistance."
The answer: elderly households with pension incomes are "doing remarkably well," Oakley said.
The report estimated that pensions prevented 4.7 million households from sinking into the poor or near poor category, and 1.2 million fewer households received public assistance, saving $7.9 billion in taxpayer-dollars.
The study defines "poor" as having income at or below the federal poverty level, while "near poor" refers to income up to twice that threshold.
The report concluded that pensions saved 460,000 households from struggling to have enough food, prevented 500,000 from needing help to pay for housing, and 510,000 from having to forego medical care.
Difficulties in acquiring food, shelter and health care more than doubled for the pension-less households, said report co-author Frank Porell, a gerontology professor at the University of Massachusetts Boston.
"This report sounds an alarm bell for policy makers and taxpayers alike," Oakley said in a statement. "We've documented a substantial increased risk of elder poverty for Americans lacking pensions that coincides with an alarming decline of pension coverage."
In 2006, 48 percent of elderly U.S. households received annual pension income, averaging $20,003 per year.
That dropped in 2010 to about 43 percent, who saw a slight uptick in average income to $20,943.
About 20.4 million elderly U.S. households lacked pension incomes in 2010. And since then, the economy has continued to falter, eroding individual retirement savings and home values, Oakley added.
Other demographics, such as race, gender and ethnicity, also affect the numbers of households in poverty. But even taking those factors into account, those with pensions fared better than those without, the report said.
"The analysis indicates pensions exert an independent, positive impact on older Americans' economic well-being," Porell said in a statement.
In 2008, former state Sen. Dan Liljenquist, a Davis County Republican, led the charge to reform Utah's public employee pension system, ultimately shifting new state employees from defined-benefit pensions to capped defined-contribution plans in 2011.
"As far as retirement goes, a pension is a great thing to have but it's difficult to pay for," Liljenquist said Thursday, noting that corporations such as GM and Chrysler faced bankruptcy due to benefits they'd promised their employees and retirees.
Pension dollars are typically invested in stocks and bonds to maximize their return. Liljenquist estimated that more than 95 percent of government employees still have pensions.
"It's hard to guarantee what the stock market will do," Liljenquist said, "and if that investment doesn't show up, the company or taxpayer has to come up with the money."
New report details the "pension factor"
In 2006 • 2.4 percent of elderly households with pensions lived in poverty, compared to 15.1 percent in poverty without pensions. (1:6)
In 2010 • 1.7 percent of elderly households with pensions lived in poverty, compared to 15.5 percent in poverty without pensions. (1:9)
4.7 million • The projected number of elderly Americans saved from poverty or near poverty in 2010 by pension income
$7.9 billion • The estimated taxpayer dollars saved due to pensioned households not needing public assistance
Source: "The Pension Factor 2012: The Role of Defined Benefit Pensions in Reducing Elder Economic Hardships, http://www.nirsonline.org