With baby boomers teetering on retirement and companies straining to pay their pensioners, America is bracing to see how we'll keep our retirees afloat without sinking the rest of us. See citizenJoe's issue guide on Social Security and brief on private pensions for the two issues being bandied in Congress. Here we offer the retiree lay of the land…

Retirement Plans: a primer

There are 3 main sources for retirement income:

  • Government sponsored Social Security System

  • Private employer-sponsored program

  • Individual savings plan

Social Security

Social Security is a federally run “pension” system for retired workers and the largest source of income for American Seniors. See our Social Security fact page for more on who gets Social Security, how it works and the fiscal problems it's facing.

Private Employer-Sponsored Retirement Plans

Most retirement programs are “qualified” plans – that is, plans that meet the requirements of Section 401 of the tax code. There are 2 types of qualified plans.

  • Defined Benefit Plan - or pension - sets up a set formula on how much an employee receives at retirement; contributions are made entirely by the employer.

  • With Defined Contribution plans – e.g. 401(K)s - instead of guaranteeing a fixed payment, an employer agrees to contribute a set amount. For example, an employer may contribute 6% of each employee's salary or match an employee's contribution to the plan. Examples include: 401(k) plan, corporate profit-sharing plan, stock bonus plan, SIMPLE plan, and SEP plan.

Individual Retirement Plans (pdf)

People that do not work for an organization that offers a retirement plan usually open up private retirement accounts. There are 2 main types of individual plans:

  • Individual Retirement Accounts (IRAS)- plan that allows people to invest money for retirement and pay no tax on the amount invested either at the time of investment or after retirement.

  • Roth IRAs - contributions are taxed at the time they are made, but contributions are withdrawn tax-free provided certain conditions are met.

The Plans Workers are on:

% of families with some kind of retirement account (either work-related or private)

  • 52% (2001), according to the Fed (pdf)
  • 58.6% (2001), according to EBRI

% of all workers in Defined Benefit Pension Programs: BLS

  • 2004 - 21%
  • 1999- 21%

% of all workers with Defined Contribution Plans: BLS

  • 2004 - 42%
  • 1999- 36%

31% of households owned some type of IRA (2001) EBRI

Where seniors' money comes from (65+) in 2004

source: EBRI & EBRI (pdf)

Where seniors' money comes from (65+) since the 70's

source: EBRI (pdf)

Where the facts are from

  • BLS - Bureau of Labor Statistics

  • EBRI - Employee Benefit Research Institute

  • ICI - Investment Company Institute


  • An unusual conservative-liberal union of think tanks (the conservative Heritage Foundation and the liberal Retirement Security Project) came up with a plan (pdf) to get more low and middle income workers building their nest egg.

  • A NYTimes article suggests retirees are using "reverse mortgages" on their homes to help pay the bills.

Facts pulled together with Vincent Greco. Summer 2005.

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