The U.S. retirement system received a C+ grade again this year, but its score has dropped for the second consecutive year in a new ranking of global retirement systems.
The U.S. system, which is primarily funded by Individual Retirement Accounts (IRAs), 401(k)s, and Social Security, ranked 29th out of 48 countries, according to the Mercer CFA Institute Global Pension Index. Its overall score fell to 60.4 out of 100, down from 63.0 last year and 63.9 in 2022. It also fell below the overall average of 63.6.
In the U.S., scores declined across all subcategories—adequacy, sustainability, and integrity—that make up the overall score. But the biggest hurdle was adequacy, which includes benefits provided by current pension systems and design features that can potentially improve the likelihood that adequate retirement benefits are provided.
Why are retirement systems under stress?
As fewer people enter the workforce after decades of declining birth rates, the imbalance between the retired population and the working-age population continues to grow.
This trend, along with increasing longevity and a prolonged cost-of-living crisis, will directly impact the future success of the U.S. retirement savings system.
What measures can the U.S. take to improve its retirement system?
Better access to retirement plans and financial education
In the U.S., only 52% of the working-age population has a retirement account. In the best systems, that number is over 80%. This means that nearly all employees, whether temporary or full-time, are saving money for their retirement, either through employee or employer contributions, or both.
The U.S. also needs to boost financial education, starting in schools.
Which country has the best retirement system?
The top three countries, according to the research, are the same as last year:
• No. 1 Netherlands (score of 84.8/100)
• No. 2 Iceland (83.4)
• No. 3 Denmark (81.6)
Which country has the worst retirement system?
The three lowest-ranked countries, according to the report, are:
• No. 1 India (44.0/100)
• No. 2 Argentina (45.5)
• No. 3 Philippines (45.8)
Source: USA Today