P&I has recently reported on an OECD report.  “The OECD’s “Pensions at a Glance 2017” report analyzed the level of retirement benefits from mandatory public and corporate plans relative to earnings.” The report found that for “full-career workers” with average earnings, the future gross replacement rate averages 53% for men and 52% for women in 35 OECD countries.

Unfortunately, but not surprisingly, the U.S. ranks below median with a gross retirement replacement rate for mandatory plans of just 38%.  Again, this is an evaluation of full-career workers in mandatory plans. With the demise of the DB plan in Corporate America, one can forecast without sticking their neck out too far that this ranking will continue to deteriorate.

The greater reliance on defined contribution plans is poor policy based on the fact that untrained individuals are being asked to fund, manage, and disperse a retirement benefit in an environment of modest wage growth, changing employment opportunities, and longevity issues caused by us living longer. There is a far greater likelihood that many of our elderly will be living on social security alone, as retirement benefits prove woefully insufficient.

Much more needs to be done to help our employees prepare for their retirement years, and mandating that they work longer is not the answer for most. Regrettably, this study points out that “reforms have been fewer and less widespread than in previous years”.