Retiree spending of defined benefit pensions generated $1.2 trillion in total economic output, supported 7.5 million jobs across the country, and produced $202.6 billion in tax revenue, according to a new study by the National Institute on Retirement Security (NIRS).
In New York state alone, expenditures stemming from state and local pensions in 2016 generated $42.8 billion in total economic output, poured $9.6 billion into tax revenues, and supported 251,525 jobs that paid $15.7 billion in wages, according to the report titled "Pensionomics 2018: Measuring the Economic Impact of Defined Benefit Pension Expenditures."
Pension expenditures "have a 'ripple effect' in the economy, as one person’s expenditures become another person’s income," said Ilana Boivie, the researcher who conducted the study for NIRS.
The report also found defined benefit (DB) pensions play a stabilizing role in local economies during economic downturns – which could become increasingly important as concerns rise over a possible recession ahead.
"Retirees with DB pensions know they are receiving a steady check despite economic conditions," Boivie said. "In contrast, retirees may be reluctant to spend out of their 401(k)-type accounts if their savings are negatively impacted by market downturns."
NIRS Executive Director Diane Oakley added that the analysis shows virtually every state benefits when retirees spend their pension checks. "Pension expenditures are especially vital for small and rural communities where other steady sources of income may not be readily found if the local economy lacks diversity," she said.