US retirement income system is only slightly above average, report reveals
investmentnews.comThe system that millions of Americans rely on for their retirement income is only slightly above average and may require reform.
That’s according to the Mercer CFA Institute Global Pension Index which looks at 47 of the world’s retirement income systems to identify weaknesses and suggest ways to make them better.
The U.S. system has a C+ rating and scores 63.0 overall, putting it just ahead of the 62.9 global average, but behind countries including Canada, the UK, Australia, Singapore, Germany, Chile, and Uruguay. In position terms, the U.S. is at 22 out of 47.
It’s mid-range spot means that the U.S. system “has some good features but also has major risks and/or shortcomings that should be addressed; without these improvements, its efficacy and/or long-term sustainability can be questioned.”
The system scores a B for adequacy, C+ for sustainability, and C for integrity.
The report says that it could be improved by:
Katie Hockenmaier, partner, US Defined Contribution Research Director, Mercer, commented that there are promising opportunities for progress amidst the ongoing efforts to improve retirement security in the US.
“The implementation of SECURE 2.0 and the advancements in generative AI are expected to play a significant role in driving this progress. By combining regulatory initiatives with technological innovations that expand access to financial planning, we anticipate improvements in areas such as retirement plan leakage, access, and coverage,” she said.
However, the 24th place ranking for adequacy means urgent action is required, especially as retirement savings coverage and institutional quality retirement vehicles remain out of reach for many Americans, creating a significant adequacy gap.
“While SECURE 2.0
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