retirement, social security, Hockenmaier, 401(K), retirement, social security, tax break, georgia, Georgia

World Retirement Systems Get Assessment, U.S. Gets Only An C+

America’s retirement system is once again considered among the worst in the developed world in the 2023 version of the yearly Mercer CFA Institute Global Pension Index.

According to CBS News, the United States received a C+ largely due to the stratification embedded in the dual retirement systems it employs.

The report lists a C+ rating: “A system that 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.”

Social Security and private pension plans like 401(K)s should, in theory, cover most Americans, but many slip through the cracks. With 401(K)s, for example, approximately half of U.S. workers do not have a retirement plan through their workplaces. Social Security will only replace around 40% of the income lost when American workers retire, putting a considerable strain on their finances. 

By comparison, The Netherlands has one of the world’s best retirement systems, where corporate-sponsored employee pension plans cover 90% of employees. Its Social Security program, Mercer notes, is in the midst of an upheaval and, if not resolved, will result in a 20% decrease in benefits for retirees.

As Katie Hockenmaier, the U.S. defined contribution research director for Mercer, told CBS News, “Retirement savings coverage and institutional quality retirement vehicles remain out of reach for many Americans, creating a significant adequacy gap that needs to be addressed.”

Furthermore, Hockenmaier says the findings of the institute’s study indicate an “urgent need for action.”

Mercer suggests 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, like a residual payment.

The United States ranks 22nd in Mercer’s overall index out of 47 countries it surveyed, which is in line with its C+ rating, placing it around the middle of the pack. In its featured chapter discussing the impact of artificial intelligence on retirement systems, Mercer’s report says it will have a tremendous impact on how pension and Social Security systems function, “Artificial intelligence (AI) has been with us for years and is affecting our lives in many ways, from the use of search engines to institutional investment decisions. Yet, during the next decade, its prevalence is likely to increase significantly so that it will affect every aspect of our pension and social security systems.”

Overall, the chapter strikes a hopeful tone that the expansion of AI in the retirement system will be used to benefit retirees. 

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