For much of the 20th century, pensions were a defining feature of the American workplace. They offered workers the promise of a secure retirement and signaled long-term commitment between employer and employee. But over the past 40 years, that promise has quietly eroded.Â
Today, the traditional pension is nearly extinct in the private sector, replaced by retirement systems that place more responsibility — and risk — on the shoulders of workers themselves.
The Decline of Traditional Pensions
In 1989, about 60% of private-sector workers were covered by defined benefit (DB) plans, which guarantee a fixed monthly payment after retirement. By 2022, that number had dropped to around 20%, and even lower in some industries.Â
Meanwhile, defined contribution (DC) plans like the 401(k) have become the new normal. More than 115 million Americans now have access to DC plans, compared to just 32 million in DB plans.
So what happened?
The pivot away from pensions began in earnest during the 1980s and accelerated in the decades that followed. For employers, the rationale was clear: DB plans are expensive, difficult to predict, and require long-term funding commitments.Â
In contrast, DC plans offer cost certainty, are easier to administer, and shift investment risk to the employee. The move was also supported by favorable tax policy and deregulation that made it easier for employers to adopt these plans.
Today, only about 15% of private-sector workers have access to a DB plan at all, and participation rates are even lower. In contrast, roughly 70% of these workers have access to a DC plan, though participation still depends heavily on income, education, and industry.Â
While DC plans have seen widespread adoption, not all workers feel equally equipped to manage their retirement on their own. Investment decisions, contribution levels, and market timing can all affect long-term outcomes — something that DB plans shielded employees from entirely.
Public sector workers, however, have largely retained access to pensions. In 2022, 86% of state and local government employees were offered a defined benefit pension plan, and 87% of those with access chose to participate.
This split between public and private workforces has created growing disparities in retirement security.
And the gap is beginning to show. While DC plan holders generally express confidence in their ability to retire, many economists warn of a coming crisis in retirement readiness.Â
Among those actively saving in 401(k)s, many are not on track to maintain their standard of living in retirement. The issue is especially acute for gig workers, freelancers, and low-income earners, who often lack access to any retirement plan at all.
What’s Next for Workers and Plans?
Some unions have begun pushing back. Recent negotiations by Boeing employees, for instance, have included demands to restore pensions that were frozen or eliminated in the past two decades.Â
These efforts reflect a growing awareness that DC plans, while portable and flexible, do not provide the same financial certainty as traditional pensions once did.
Cities and employers are also beginning to explore hybrid models, which combine elements of both DB and DC plans to offer more balanced outcomes. Others are looking for policy solutions.Â
Proposals include expanding access to state-run retirement plans, requiring auto-enrollment in employer-sponsored plans, and improving Social Security funding to cover more of retirees’ income needs.
Despite the concerns, the trend shows little sign of reversing. New pension plans are rarely introduced, and the administrative costs of maintaining existing ones remain a deterrent. Rising life expectancy and unpredictable market performance only add to the challenge.
What It Means for Today’s Workforce
For today’s workforce, the end of the pension era means one thing above all: the burden of retirement security now rests largely with the individual.Â
In place of a guaranteed benefit, workers must navigate market risk, savings strategies, and financial planning with limited support. As the demographic pressures of an aging population mount, the need for more stable, inclusive retirement solutions is becoming impossible to ignore.
The pension puzzle may not have a single answer, but the longer it remains unsolved, the more precarious the future becomes for millions of workers planning for life after work.
