Retirement security

Is your retirement secure? That’s a loaded question these days. Most AFT Public Employees members participate in defined-benefit pension plans that provide retirees guaranteed income for life. The amount of the benefit is typically based on years of service and final average salary.

Defined-benefit pension plans are the best option for ensuring retirement security. The median balance of retirement savings for those near retirement age is $12,000, and many working families have no employer-sponsored retirement account—such as a 401(k). Meanwhile, the median pension is about $15,500 a year, with the median benefit for state and local pensions being nearly $25,000 a year. This consistent, modest income, when combined with Social Security and savings, allows workers to retire with dignity. As Americans face a looming retirement crisis, spurred by the fact that many families have virtually no savings or investments, it is more important than ever that we expand access to and protect the quality of defined-benefit pension plans.

Of course, pensions don’t only provide retirement security to millions of Americans. It is estimated that $250 billion in AFT members’ pension assets are invested in fossil fuel companies and related assets. The AFT is committed to identifying alternative opportunities for members’ pension funds that simultaneously create and support good jobs and generate noncarbon-emitting energy, provide a just transition for workers and communities that may be harmed due to changing energy sources, and produce positive risk-adjusted financial returns for members’ pensions. The AFT is also working with pension trustees and stakeholders at every level to divest our members’ pension funds from investments that are at risk from climate change and instead invest in durable investment opportunities, including low or zero carbon-emitting schools, housing and infrastructure projects, along with renewable energy.

Pension funds also intersect with the AFT’s commitment to leading the fight for racial justice. Diversity of identity and thought enriches our society, and empirical evidence has shown that diversity, equity and inclusion yield better business performance, including stronger investment returns. For these reasons, the AFT is working with public pension funds, policymakers, advocacy organizations and affiliates to promote diversity, equity and inclusion among asset managers and pension boards. However, a combination of factors, both real and manufactured, have resulted in increased scrutiny of defined-benefit pensions for public employees. Your retirement benefits have been called “America’s pension time bomb,” “the unspoken deficit” and a “huge burden for state and local governments.” Pensions are under assault by opportunistic politicians and greedy corporations.

Increasingly, hedge funds and private equity are aggressively pursuing public pension dollars. Private equity currently manages more than $4 trillion of workers’ deferred wages in pension funds, while charging fees that are much higher than the fees charged by public assert managers. Hundreds of billions of dollars are currently invested in hedge funds, which similarly charge high fees while regularly failing to deliver significant benefits. The AFT is committed to informing stakeholders about the threat hedge funds and private equity firms pose to members’ pension funds; pushing for maximum, regular, consistent and disaggregated disclosure of fees and returns data; and urging fiduciaries of our funds to seek to limit investments in companies whose aims run contrary to the aims of our members and the health of our pension funds.