NIRS Releases Pensionomics 2023

The National Institute on Retirement Security released a new report, Pensionomics 2023: Measuring the Economic Impact of Defined Benefit Pension Expenditures. This report calculates the impacts U.S. pensions have on national, state and local economies. This study specifically evaluates data from 2020.

Pensionomics 2023 also evaluates the “multiplier” effect pensions have on the economy. Each dollar spent from a pension benefit has a direct, indirect and induced impact on the economy (or “ripple” effect). NIRS further explains this effect with the example of a retired firefighter who uses his pension benefit to purchase a new lawnmower (direct impact). This purchase supports the owner of the hardware store and other manufacturers involved in the sale and production of the lawnmower (indirect impact). The store owner and manufacturers can then expand their employment opportunities, hiring employees who will spend their paycheck in the economy (induced impact).

Some highlights from the report:

• In 2020, each dollar paid out in pension benefits supported $2.13 in total economic output.
• Pensions supported $1.3 trillion in total national economic output.
• In 2020, each dollar in taxpayer contributions to U.S. state and local pension plans supported $7.89 in total output in the country. Keep in mind, taxpayer contributions are a small source of financing for retirement benefits. The majority of money used to pay for benefits come from investment earnings and employee contributions.
• For the state of Louisiana, each dollar paid in pension benefits supported $1.142 in state economic output.
• Pensions supported $6.5 billion in total economic output in Louisiana.
• In 2020, each dollar in taxpayer contributions to Louisiana’s state and local pension plans supported $3.10 in total output in the country. Keep in mind, taxpayer contributions are a small source of financing for retirement benefits. The majority of money used to pay for benefits come from investment earnings and employee contributions.

The recent NIRS study reiterates the economic impact of pensions and echoes our support for our current Defined Benefit plan. Pensions provide a modest, reliable stream of income to retirees, which allow them to contribute to their local and state economies. Pensionomics 2023 reiterates the importance and impact of steady, reliable retirement benefits on the economy, in particular for small or rural communities where sources for steady income may be sparse.

This report also demonstrates the importance of protecting the purchasing power of the retiree. Retirees need their benefits to sustain their dignity and quality of life, which will have positive direct and indirect impacts on local and state economies. Consistent and reliable cost-of-living adjustments (COLAs) are vital to protecting the purchasing power of the retiree. LRTA looks forward to working with the retirement system and legislators toward a solution that will make regular COLAs a reality for Louisiana’s retired teachers.

Download and read the full report here.

Download and read the Louisiana fact sheet here.