In this episode of Adam Talks, Adam Bergman, Esq. discusses a new report that ranks the retirement systems of different countries around the world, and how the US can do better.
How the US Retirement System Rates Against the World
On this episode of Adam Talks, Adam Bergman discusses the US retirement system compared to other countries and highlights the need for improvement. The US received a C+ rating in the Mercer CFA Institute Global Pension Index, while countries like the Netherlands, Iceland, Denmark, and Israel received higher ratings. Bergman notes that the European countries with government-intensive retirement systems tend to have higher ratings. They mention the shift from defined benefit (DB) to defined contribution (DC) pension plans in the US and the low percentage of small and mid-sized businesses offering 401(k) benefits.
The demographic challenges facing the US retirement system are highlighted, with an increasing number of baby boomers retiring and fewer people entering the workforce. Social Security is mentioned as potentially running out of money in the next 15 years. Bergman stresses the importance of individuals taking responsibility for their retirement savings. He clarifies that the index rates the best retirement system, not the best countries to live in.
The focus then shifts to the retirement system in the Netherlands, which received the highest rating. The Netherlands’ system consists of a combination of public and private pension accounts, with a strong participation rate from both companies and employees. Bergman suggests that the three-layered approach of Social Security, a forced public plan, and a private augmented plan makes the most sense.
In another part of the episode, the financial burdens faced by employers in offering retirement plans are discussed. Bergman proposes alternatives to requiring employers to make matching contributions, suggesting that smaller companies could be mandated to offer the plan without the matching requirement. He also proposes an alternative approach to the Earned Income Credit, where a portion of the credit could be invested in a Roth IRA for children, providing tax-free savings for education or purchasing a house.
Bergman further discusses the benefits of incentivizing small businesses to offer retirement plans and encouraging Americans to save. He mentions the challenges of inflation and stretched dollars but believe that the Earned Income Credit Roth program could serve as a safety net for individuals, ensuring they have a retirement account that supplements Social Security and other savings.
Overall, this episode emphasizes the need for improvement in the US retirement system, highlights the challenges it faces, and suggests strategies such as promoting retirement savings, reevaluating the current system, and considering alternative approaches to help Americans save for retirement. The success of the retirement system in the Netherlands is also highlighted as an example to learn from, with its combination of public and private plans and high participation rates.
For more information, be sure to listen to this week’s episode.
