Report: DB Returns Beat 401(k), IRA Accounts Since 1990

Source: Center for Retirement Research report

Source: Center for Retirement Research report

The Boston College Center for Retirement Research (CRR) released a report this week analyzing the investment returns since 1990 for three types of retirement accounts: traditional defined-benefit pensions; 401(k)s; and IRAs.

The results, summarized by Governing Magazine:

It found that traditional defined-benefit pensions earned an average of 0.7 percent more each year than defined-contribution 401(k)s — even after controlling for plan size and type of investments.

One reason for the slightly lower returns in 401(k)s is higher fees, which the CRR said “should be a major concern as they can sharply reduce a saver’s nest egg over time.” The same is true for individual retirement accounts (IRAS), which is where much of the money accumulated in 401(k)s is eventually rolled over into. While some researchers have suggested that the difference between defined-benefit and defined-contribution plan returns has declined in recent years, the report said it’s actually larger after 2002.


The past decade has seen many attempts to shift public employees to 401(k)-style plans in an effort to take the funding burden off governments.

Read the report here.

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