U.S. Retirement System Earns C+ in Global Index Amid Coverage Gaps

The U.S. retirement system received a C+ grade in the 2024 Mercer CFA Institute Global Pension Index, reflecting weaknesses in coverage and income stability compared with nations that mandate retirement savings. Researchers noted that while the U.S. relies primarily on voluntary 401(k)-style plans, countries such as the Netherlands and Australia require mandatory contributions, expanding participation and strengthening long-term security.

The index, which evaluates 48 retirement systems worldwide, ranked the U.S. 29th overall. “It means that the system is solid, designed well, but there is a significant risk,” said Christine Mahoney, global pensions leader at Mercer. “And if we don’t clear that risk up, the system could be in some jeopardy.”

Experts say mandatory contributions are a key factor distinguishing higher-performing systems. In the Netherlands, for example, both employers and employees are required to contribute to retirement accounts. “You can’t opt out of it either as an employer or as an employee,” Mahoney explained. “So getting money [into defined contribution accounts] in the U.S. is a real challenge because it is a voluntary system.”

Retired couple at the beach | Source: Pexels

Defined contribution plans like U.S. 401(k)s leave final retirement outcomes uncertain, depending on how much workers save and how investments perform. In contrast, defined benefit programs such as Social Security guarantee income based on salary and years of service.

According to the Organisation for Economic Co-operation and Development, many nations are raising retirement ages and mandating contributions to adapt to longer life expectancies and shrinking workforces. For the U.S., Mahoney emphasized, “the thing that could change that grade significantly, the most important is actually coverage. Our 401(k) plans are voluntary.”