Government Defined-Benefit Analysis

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According to Pension Rights Center, half of all Americans age 65 or older have incomes of less than $18,819 a year, which is far less than the amount that majority people need to meet the living and health care expenses. In addition, the average Social Security payments to retirees is only $15,179 a year, and that is roughly two-fifths of their earnings before retirement.
Meanwhile, the federal minimum wage is $15,080 a year, and that is about half of what retirees need to maintain their living standards in retirement. Government Sponsored Defined-Benefit
Pension Plans provide incentives to attract talents to work for the government. The pension plans serve the purpose of providing safety and security in retirement.
Pension plan is a defined benefit plan that …show more content…

The pool of funds is invested on the employee, and the earnings on the investments generate income to the worker upon retirement. Employees do not have control of investment decisions with a pension plan. The government agency promises to provide a certain monthly income to retired employees based on the amount contributed and the number of years spent working for them. Pensions are better designed for employees who stay with the same government agency for many years. Many people decided to work for the government agency due to the great benefits that they offered, and pension plan is one of the benefit working for the government agency. However, some people argue that government pension plans are too costly and unsustainable.
The pension plans of many government agencies are severely underfunded. Thus, there is a threat to the government’s fiscal sustainability. Some politicians pressured the government to convert to a defined contribution plan. A defined contribution plan such as 401K is like a saving accounts, and it funded primarily by the employees, and the employer will match contributions to a certain amount. However, a defined contribution plan does not guarantee minimum

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