Retirement is a goal many people worldwide look forward to achieving. Countries typically offer some type of pension or social security system to support retirees, but these systems vary significantly in effectiveness.
The 2024 Mercer CFA Global Pension Index revealed how the United States’ pension system measures up globally—and it isn’t exactly a shining example.
The U.S. ranked 29th out of 48 countries, earning a C+ grade, with issues such as accessibility, adequacy, and sustainability pulling it down.
What Is the Mercer CFA Global Pension Index?
The Mercer CFA Global Pension Index evaluates retirement systems in 48 countries. It scores them based on three key categories:
- Adequacy: Assesses how well retirees are provided for financially.
- Sustainability: Measures the system’s ability to remain functional as populations age, factoring in public pension spending, government debt, and inflation.
- Integrity: Focuses on regulation, governance, and transparency to ensure members are protected and informed.
In 2024, the U.S. dropped to a score of 60.4, showing declines in multiple areas.
What Experts Say About the U.S. Pension System
Experts highlight significant gaps in the U.S. retirement system:
- Einat Steklov, CEO of Kashable, points out challenges like balancing immediate financial needs with long-term savings.
- The shift from defined benefits (managed by employers) to defined contributions (managed by individuals) has placed more responsibility on employees.
- Brandy Burch, CEO of Benefitbay, emphasizes the importance of stronger public pensions and incentives for personal savings.
Top-Performing Countries in Retirement Systems
Countries like the Netherlands, Iceland, Denmark, and Israel received A ratings for having strong, sustainable systems. These nations offer robust public pensions combined with incentives for private savings.
In contrast, the U.S. relies heavily on Social Security, which was never meant to be the sole income source for retirees. While 401(k) plans and IRAs have expanded savings options, millions of Americans still face retirement insecurity.
Opportunities for Improvement in the U.S. System
Despite its shortcomings, there are opportunities to strengthen the U.S. pension system:
- Expand Social Security: Enhancing benefits could provide a stronger safety net.
- Increase Accessibility: Ensure workplace retirement plans, like 401(k)s, are available to more employees.
- Boost Education: Improve financial literacy to help people make better retirement decisions.
- Encourage Saving: Continue incentives such as employer match contributions and tax advantages for IRAs.
How Other Countries Are Adapting
Even top-ranking countries face challenges. For example, the Netherlands is transitioning from collective benefit systems to individual defined contribution plans.
This shift shows that no retirement system is perfect, but adaptability is key to long-term success.
The 2024 Mercer CFA report highlights critical issues in the U.S. retirement system, which currently struggles to balance adequacy, sustainability, and accessibility.
However, with reforms like expanding Social Security, increasing financial education, and promoting savings plans, there is potential for improvement.
Learning from top-ranking nations could guide the U.S. toward a more secure future for retirees.
1. What is the Mercer CFA Global Pension Index?
It’s a yearly report that evaluates retirement systems in different countries based on adequacy, sustainability, and integrity.
2. Why did the U.S. pension system get a low rank?
The U.S. scored poorly due to gaps in accessibility, adequacy, and long-term sustainability, earning a C+ grade.
3. How do top-ranking countries handle retirement systems?
Countries like the Netherlands and Denmark combine strong public pensions with incentives for private savings to ensure retirees’ financial security.
4. What is the biggest challenge for U.S. retirees?
Balancing immediate financial needs with long-term savings is a significant hurdle for many Americans.
5. Can the U.S. improve its retirement system?
Yes. Expanding Social Security, offering more savings options, and increasing financial literacy are some ways to enhance the system.
