Rebuilding the Middle Class Starts With Retirement Security

By: Hank Kim, CEO, NCPERS

Across the country, Americans are confronting a troubling and deeply personal reality: for the first time in modern history, most people do not believe the next generation will be better off than the last. Nearly 80% of Americans report that they do not expect life for their children to exceed their own opportunities. This sentiment isn’t abstract — it’s rooted in lived experiences of economic strain, shrinking safety nets, and a sense that the promise of upward mobility is slipping away.

One of the most important, yet often overlooked, drivers of this generational pessimism is the growing insecurity around retirement. For decades, pensions served as a foundation for the American Dream: work hard, contribute steadily, and retire with dignity. But as private-sector employers moved away from pensions and toward individual accounts like 401(k)s, that foundation weakened. And today, we are seeing the long-term results with unmistakable clarity.

The Cost of Shifting Risk onto Individuals

Over the past 40 years, the U.S. has conducted a largescale experiment: transferring retirement risk from employers to individual workers. Most people were never given a choice — pensions simply disappeared, replaced with accounts that require workers to become investors, strategists, and risk managers. And the results speak for themselves.

On average, 401(k) investment returns are lower than pension plan returns, and the typical 401(k) benefit is only about 24% of the average pension benefit. According to Federal Reserve data, workers aged 55 to 64 hold a median of just $185,000 in retirement savings — far below what they will need for a stable retirement.

Meanwhile, older adults are the only age group experiencing rising poverty rates — 15% in 2024, up from 10.7% in 2021. If current trends continue, inadequate retirement savings could cost states $334.3 billion by 2040 and $1.3 trillion in combined state and federal expenditures. These are not just financial projections; they are warnings that the systems intended to support Americans in retirement are failing too many.

Pensions Level the Playing Field

But there is good news: we know what works.

Research from the National Institute on Retirement Security and the UC Berkeley Labor Center shows that pensions dramatically reduce retiree poverty and near-poverty across race, gender, and educational attainment. Pension income boosts middle-class wealth by 36% and narrows the racial and gender wealth gaps among older families. And among retirees with pension income, 91% live above 200% of the federal poverty level — compared with just 60% of those without pensions.

These are profound outcomes. They show that pensions don’t just benefit individuals. They strengthen families, communities, and the economy at large. They provide stability in retirement, ensure predictable income, and reduce the likelihood that older adults will need public assistance later in life.

Pensions are one of the most effective tools we have for restoring economic mobility and rebuilding confidence in the future.

A Moment for Renewal

As trust in institutions shifts and Americans look for solutions that feel tangible and fair, support for the kinds of collective structures that make pensions possible remains strong. Approval of labor unions — long intertwined with the expansion of workplace benefits — has held between 67% and 71% for five years in a row, the highest levels seen since the late 1950s and early 1960s.

That level of support points to an important truth: people want systems that work. They want solutions that are practical, durable, and equitable. Pensions meet that test.

Restoring the American Dream Starts with Security

Economic mobility depends on confidence. By providing guaranteed income in retirement, pooling risk, and delivering higher investment returns, pensions can help reverse the widening inequalities that feed generational pessimism. They empower workers to envision a future that feels secure and attainable. And they reduce long-term burdens on taxpayers by preventing avoidable hardship among retirees.

The American Dream has always been built on the idea that every generation can build something better for the next. Pensions are not the only answer, but they are one of the strongest, most effective tools we have to make that promise real again.