October 19th 2023.
America's retirement system is once again being ranked among the worst in the developed world in the 2023 version of the yearly Mercer CFA Institute Global Pension Index. The report gave the United States a C+ rating, citing the stratification inherent in the two systems employed by the country.
The dual retirement systems in the US include Social Security and private pension plans like 401s. Unfortunately, many Americans slip through the cracks as only half of American workers have access to retirement plans through their workplaces. Furthermore, Social Security only replaces around 40% of the income lost when retirees retire, leaving them in a financial lurch.
The Netherlands, on the other hand, has one of the world's best retirement systems, where corporate-sponsored employee pension plans cover 90% of employees. Its Social Security program is currently undergoing an overhaul and if not resolved, will result in a 20% decrease in benefits for retirees.
Katie Hockenmaier, the US defined contribution research director for Mercer, said that the findings of the institute's study indicate an "urgent need for action". Mercer is suggesting raising the minimum payment for low-income retirees and creating a system that places part of a worker's retirement benefit into an income stream, such as a residual payment.
The United States ranks 22nd overall in Mercer's index out of the 47 countries it surveyed, which is in line with its C+ rating, placing it around the middle of the pack. The report's featured chapter discussing the impact of artificial intelligence on the retirement system states that it will have a tremendous impact on how pension and Social Security systems function. It also strikes a hopeful tone that AI in the retirement system will be used to benefit retirees.
Overall, it's clear that America's retirement system needs to be improved to provide more accessible and adequate retirement options for its citizens. Mercer's report brings attention to this issue and suggests solutions that could help alleviate the current inadequacies and risks faced by the US's retirement system.
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