According to a PlanSponsor article the Melbourne Mercer Global Pension Index (MMGPI), which is now in its 10th year, shows that the U.S. retirement system enjoyed a slight improvement this year scoring a 58.8, up from 57.8 in 2017. The Index evaluates countries on the adequacy, sustainability, and integrity of the retirement income system. The study evaluated 34 pension systems and rated the Netherlands (80.3) and Denmark (80.2) as the two strongest pension/retirement systems.
The U.S. would show further improvement with these suggested changes:
- raising the minimum pension for low-income pensioners;
- adjusting the level of mandatory contributions to increase the net replacement for median-income earners;
- improving the vesting of benefits for all plan members and maintaining the real value of retained benefits through to retirement;
- reducing pre-retirement leakage (401(k) loans and premature withdrawals) by further limiting the access to funds before retirement;
- introducing a requirement that part of the retirement benefit must be taken as an income stream;
- increasing the funding level of the Social Security program;
- raising the state pension age and the minimum access age to receive benefits from private pension plans;
- providing incentives to delay retirement and increase labor force participation at older ages; and
- providing access to retirement plans on an institutional group basis for workers who don’t have access to an employer-sponsored plan.
We’ve written posts/articles on a number of these issues, especially as it pertains to the inadequacies of a defined contribution plan as a true retirement program. In addition, we are fully supportive of “retirees” working in some capacity, but the fact is that roughly 1/3 of Americans older than 65-years old would like to work, but only about 14% do. Furthermore, as the remaining Boomers turn 65, demand for job opportunities will only increase, but it is likely that the supply of age-appropriate jobs won’t.