Why Don't Lower-Income Individuals Have Pensions?

Publication Date: April 2014

Publisher: Center for Retirement Research at Boston College

Author(s): April Yanyuan Wu; Matthew S. Rutledge; Jacob Penglase

Research Area: Labor

Keywords: Financing retirement

Type: Report

Coverage: United States


The brief’s key findings are:

Obtaining an employer pension involves four steps: 1) having a job; 2) working for a firm with a plan; 3) being eligible for the plan; and 4) taking up the plan.

For lower-income individuals, the weakest links in this chain are a lack of employment and employment with firms that do not offer a plan.

Take-up rates are less of a factor, but will become increasingly important as voluntary 401(k)s continue to replace mandatory defined benefit plans.

The most effective policy solution for boosting pension participation would be to provide all workers with access to a plan and automatically enroll them.