This year, the retirement system in the U.S. earned a C+ again, marking its second consecutive decline in a recent evaluation of global retirement systems.

Each subcategory—adequacy, sustainability, and integrity—witnessed a decrease in U.S. scores. However, the most significant setback came from adequacy, which assesses the benefits given by the current pension frameworks and design elements that might enhance the chances of providing sufficient retirement benefits.

The adequacy score for the U.S. was 63.9, down from 66.7 last year and below the average of 64.9 for all examined countries, placing it at 30th among the 48 nations analyzed.

For the lowest-income workers at retirement age, the U.S. offers benefits representing 15.6% of the average worker’s earnings, according to data from the Organisation for Economic Co-operation and Development (OECD). “The best-performing systems provide at least 25% of the average wage,” remarked Dr. David Knox, lead author of the Mercer CFA Global Pension Index and Senior Partner at Mercer.

What causes pressure on retirement systems?

Knox explained that fewer individuals are joining the workforce due to a long-term drop in birth rates, creating a growing disparity between the retired and working-age populations.

“This situation, combined with increasing lifespans and a prolonged cost-of-living crisis, will directly affect the future viability of the U.S. retirement savings system,” he added.

What measures can the U.S. implement to improve its retirement system?

Enhanced access to retirement plans and financial literacy is vital, stated Graham Pearce, Mercer’s Global Defined Benefit Segment Leader.

Currently, only 52% of the working-age population in the U.S. possesses a retirement account, according to Knox. “In leading retirement systems, this figure exceeds 80%,” he noted. This means nearly every worker, regardless of being employed part-time or full-time, is setting aside funds for their retirement through employee or employer contributions or both.

The report also highlighted that many gig and contract workers in the U.S. do not have access to conventional retirement plans.

Furthermore, the U.S. must enhance financial education beginning in schools and “ensure universal access to quality advice and guidance,” Pearce emphasized. “Currently, independent financial advice of high quality is often out of reach for most plan participants.”

Which country has the most effective retirement system?

According to the research, the top three nations remain unchanged from last year:

No. 1 Netherlands (score of 84.8/100)

No. 2 Iceland (83.4)

No. 3 Denmark (81.6)

Which country has the least effective retirement system?

The bottom three countries, based on the report, are:

No. 1 India (44.0/100)

No. 2 Argentina (45.5)

No. 3 Philippines (45.8)