This report is a joint publication of the UC Berkeley Labor Center and the National Institute on Retirement Security.

A toolkit and 50 state fact sheets for this report are available on the NIRS website at https://www.nirsonline.org/resources/closing-the-gap/

See also the “Closing the Gap” study for California: Public Pensions Support Race, Class, and Gender Equity in California

Executive Summary

This study analyzes the impact of defined benefit pensions, especially public pensions, on retirement income security and wealth distribution by race, gender, and educational attainment in the U.S. It serves as a companion report to Closing the Gap fact sheets, which are designed to inform the public about the social equity impact of pensions in each state and the District of Columbia. The fact sheets can be accessed at https://www.nirsonline.org/reports/closingthegap/.

Based on analyses of U.S. Census Bureau and other data sources on income, retirement plans, and other household assets, this report finds that public pensions play an outsized role in the retirement income security of older adults and reduce wealth inequality by race and gender. Pension income provides a critical buffer against economic hardship in old age for all groups, especially Black and Latino seniors, seniors without college degrees, and women. Furthermore, the relatively even distribution of pension income and its wealth value helps to soften wealth inequality, providing a critical source of household wealth for older women and Black families. While policy debates about public pensions are often framed exclusively as financial liabilities, public pensions are also a critical form of wealth for workers and retirees. As private pension coverage declines, public sector retirement benefits form a bulwark of middle-class retirement security, particularly for marginalized communities who have been shut out of other wealth-building opportunities.

Detailed report findings are as follows:

1. Pensions, which continue to be a critical source of retirement income for seniors, reduce retiree poverty and near-poverty across race, sex, and educational attainment. Pensions’ anti-poverty effect is the largest for Black and Latino retirees and retirees of all races who do not have a four-year college degree. 

• 35% of individuals age 65 and older are direct recipients of pension benefits. White men are most likely to have pension income (43%), followed by Black men (35%), white women (34%), and Black women (33%).
• While Latino senior men and women are least likely to receive a pension (25% and 18%, respectively), this income source is much more important than retirement accounts for this community. Only 8% and 4% of Latino men and women, respectively, have income from a 401(k) or individual retirement account (IRA), compared to 15% of all U.S. seniors.
• Pensions reduce economic hardship among retirees, defined for this analysis as persons age 65 and older who have at least $5,000 in Social Security income or pension income and less than $5,000 in earnings. Among retirees with their own pension income, or whose spouse or other resident family member received pension income, 91% lived above 200% of the Federal Poverty Level (FPL) in 2018-2020. In contrast, only 60% of retirees without pension income were above 200% FPL. (A commonly-used threshold for meeting basic needs, 200% FPL in 2020 was $23,120 for older singles and $32,180 for older couples.)
• Retired white men and women with pension income were respectively 38% and 47% more likely to be above 200% FPL than those without pension income.
• Retired Black women, Latino men, and Black men were twice as likely to have incomes above 200% FPL if they had a pension. Retired Latinas with pension income were 63% more likely to be above this basic income threshold.
• Among retirees without a bachelor’s degree, those with some college education or an associate degree were 47% more likely to be above 200% FPL if they had pension income. Those with no college education were 73% more likely to be above 200% FPL than those without a pension.

2. Pension income is distributed relatively evenly among recipients by race, while public pension income is distributed more equally by gender than private pension and 401(k) income.

• In 2018-2020, 23.2 million Americans age 55 and older received pension income totaling $470 billion annually from a union, private employer, or government plan. More than 11.1 million older adults received income from public pensions, which provided $259 billion, or 55% of total pension income. Nearly 12.7 million received private pension income.
• The typical Black pensioner received about the same annual benefit as a typical white pensioner ($15,180 vs. $15,460).
• Women made up over half (54%) of public pension recipients, compared to 46% of private pension recipients.
• The gender gap in average annual benefits is significantly smaller for public pensions—which provided women 75% of the median annual benefit for men ($18,600 vs. $24,700)—than other non-Social Security retirement income sources. Women with private pension income received 60% of the median annual benefit of male beneficiaries ($8,100 vs $13,400), while women with 401(k)/IRA income received 59% of men’s median annual 401(k)/IRA income ($6,000 vs. $10,200).

3. Pension benefits currently in payment to adults age 55 and older in the U.S. represent $5.6 trillion in household wealth, boosting middle-class family net worth and narrowing racial and gender wealth gaps.

• Counting only pensions already in payment (i.e., not including pension benefits payable to those still working), people of color hold 20.1% of public pension wealth and 18.0% of private pension wealth held by adults age 55+, compared to 12.4% of 401(k)/IRA assets and 13.2% of total net worth.
• Including the present value of pension income in household wealth boosts the typical (median) net worth of older families by 36%. Older Black family median net worth is increased 86% by pensions, with public pensions providing more than half of this impact.
• The progressive impact of pensions on the Latino community is constrained by their historical under-representation in public sector employment. Nonetheless, pension benefits increase older Latino families’ median wealth by 32.4%, with two-thirds of this boost coming from private pensions. Pensions also increase Latinos’ collective wealth by 15.5%, compared to the average of 10.6% for all older families. Public pensions alone increase the aggregate wealth of older Latino families by 10.5%.
• Public pension income plays a larger role in narrowing the gender wealth gap among older adults than private pension income and 401(k)/IRA assets. More than half (50.4%) of public pension wealth is held by women, compared to 38.2% of private pension wealth and 38.6% of 401(k)/IRA assets.

Download the full report.