While many Americans struggle to save for retirement, elected representatives and senators in the United States Congress receive substantial pension benefits for life. Though Congressional retirement pay is not typically a big election-year issue, it might serve as evidence of a disconnect between lawmakers and mainstream America.
Key Takeaways
- Congressional representatives have access to a variety of retirement plans.
- A typical member of Congress has a net worth that far surpasses a typical American citizen’s net worth.
- The average American saves far less for retirement than a member of Congress does.
Overview
The median net worth for a member of Congress is over $1 million. The median wealth for an American household, in contrast, is $166,900. That means half of American households’ wealth is lower than that number, and half is lower. (This includes households that are in debt, with negative wealth.)
Congressional members are eligible for their own unique pension plans under the Federal Employees Retirement System (FERS), though there are other retirement options available, ranging from Social Security and the Civil Service Retirement System (CSRS). Currently, members of Congress are eligible for a pension dependent on the member’s age at retirement, length of service, and salary. The pension value can be up to 80% of the member’s final salary, which is $174,000 per year, At an 80% rate, that’s a pension benefit of $139,200. (The Speaker of the House has a salary of $223,500. The Senate President makes $193,400, as do the majority and minority leaders in the House and Senate.) All benefits are taxpayer-funded.
Additionally, members of Congress enjoy the same Thrift Savings Plan (TSP) as all other federal employees, which is similar to a 401(k). Congressional contributions are matched up to 5% of salary per year, in addition to an extra 1% giveaway regardless of how much the congressperson contributes, if anything.
Few private employees have the option to contribute to an employer-sponsored defined benefit pension plan. Most have the option to contribute to a 401(k) or 403(b), while others may contribute to an employee stock ownership plan (ESOP) or some other retirement option. The median benefit for private pensions and annuities for those 65 and older is $11,040 per year. For state and local government pensions, it’s approximately $24,980 per year. Of course, some people receive both Social Security and a private pension. The median Social Security benefit for those 65 and older is $18,520, so with a private pension, that’s an income of nearly $30,000 per year. As far as other retirement assets, the Federal Reserve found that the median retirement account balance in 2022 was $86,900 and the average balance was $334,000.
How Benefits Have Changed Over Time
Participation in defined benefit pension plans peaked in the private sector in the early 1980’s. More than 80% of American employees who worked for large companies in the private sector contributed to a pension plan. By 2011, that rate dropped below 20%. In 2001, 5% of the Fortune 1000 closed down or froze their defined benefit retirement plans. By 2004, it was over double that (11%).
Defined contribution plans, like 401(k)s, have become more prominent. 69% of private sector companies offer defined contribution plans. Only 15% offer defined benefit plans. Of these, 52% and 11% of workers participate, respectively.
Increasingly, American workers are forced to rely on 401(k) plans, individual retirement accounts (IRAs) and Social Security for their retirement. Among these, only Social Security provides a guaranteed minimum payment in retirement, and even those benefits seem uncertain, considering the massive unfunded future liabilities faced by the U.S. government.
Previous Pensions
Congress did not always receive a gold-plated pension. Before 1942, members of Congress did not receive a taxpayer-funded retirement plan. This early system was quickly scrapped after public outcry, however. A pension was put into place after World War II and eventually replaced by FERS in the 1980s. The current Congressional pension system has not changed much since September 2003, after which all incoming representatives and senators were no longer able to decline FERS.
During and After the Financial Crisis
Unfortunately, the once-promising 401(k) era failed to live up to its promise after unrealized gains were wiped out by the 2001 and 2007–2009 recessions, though some of the lost retirement wealth from 2009 recovered quickly. By 2011, the average retirement account balance increased by 7%.
Those gains were conspicuously concentrated among the wealthiest Americans. Approximately 45% of workers saw declines in the value of their retirement assets to the tune of thousands of dollars between 2009 and 2011, despite the fact that the S&P 500 grew approximately 54% over that period.
Note
“9 in 10 high-income families contribute to retirement savings accounts. For low-income families, that ratio drops to 1 in 10.”
What Does a Senator Make in Retirement?
Since 2009, Congressional pay has been $174,000 per year, which, at an 80% rate, equates to a lifelong pension benefit of $139,200. (There are a few exceptions. The Speaker of the House has a salary of $223,500. The Senate President has the same salary as the majority and minority leaders in the House and Senate: $193,400.) Under the Federal Employee Retirement System (FERS), Members of Congress are eligible to receive this full pension once they are at least 62 years old, as long as they’ve served for at least 5 years. Alternatively, if they’ve worked in the job for at least 20 years, their pension can kick in at age 50. If they’ve served for at least 25 years, there’s no minimum age to receive their pension. The Civil Service Retirement System (CSRS), which is only an option for representatives elected before 1984, is similar: a member of Congress may retire at age 60 with 10 years served, or at age 62 with five years of civilian federal service, which includes working in Congress.
Can Senators Be Paid After They Retire?
While members of Congress don’t get paid their full salary after they retire, they do receive a pension that can be up to 80% of their $174,000 salary, depending on the amount of time served.
Do Members of Congress Receive Full-Pay Retirement Benefits After Serving One Term?
No, members of Congress do not receive their full pay as a retirement benefit after serving only one term. Their pension is based on the amount of time served. To be eligible for the Federal Employee Retirement System (FERS) pension, they must have served in Congress for a minimum of five years (and be at least 62 years old).
The Bottom Line
There are more retirement plan options for a member of the United States Congress than for the average citizen.
Every member of Congress has access to several retirement plans, and their defined benefits are not negatively impacted by stock market recessions.
Congress also has the unique position of determining its own benefits without having to worry about turning a profit—a private company may have to freeze its pension plan or perform a buyout if it experiences balance sheet problems, but the U.S. Congress must only appropriate tax dollars. Even state and local government pensions are often limited by balanced budget amendments or the tolerance of local taxpayers.
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