U.S. Social Security System may be getting just what it needs…to be Benchmarked! Just because the United States has the largest number of self-funded retirement plans, the greatest amount of aggregate assets within any social retirement system and the greatest number of plan participants – that doesn’t automatically translate to our being the best at ‘Doing the Right Things’. The number of participants, is but a single measure – but against what?
Our Social Security System is known across the globe as being successful – to a point. However, there are areas where other countries actually measure up-to and exceed what we deliver within the United States Social Security System.
For example, other countries deliver a much larger income replacement ratio to their retirees, than does the United States’ Social Security System. And the differences outlined by The Organization for Economic Cooperation and Development (OECD) do not just stop there:
- Future net replacement rates from mandatory retirement schemes for full career average wage workers equals 90% or more, in Hungary, Portugal and, Turkey for those who retire at the normal retirement age;
- Denmark, Ireland, Italy, and Lithuania have extended early retirement options;
- Men retiring in Turkey during 2020, had the lowest normal retirement age at 52 years;
- Brazil has introduced minimum retirement ages, modified contribution rates.
Another way to compare plans is to determine how the lower-paid citizens benefit from the Social System as compared with the higher-paid citizens.
Australia has a reputation for providing incentives to their citizens as an add-on to their Social Retirement System.
The question comes down to, “Is the country using the Social System prudently?” Is the country truly attempting to help and assist the citizens – or, are they just ‘cutting a check’. There is a big difference in intent and outcomes!
This week in 401k Real Talk – at approximately 4 minutes and 30 seconds in – Josh Cohen of PIGM’s DC Solutions article is discussed by Fred Barstein. For those in interested in what makes a great Social Retirement System – visit 401k Real Talk. For those interested in a comparison of the various retirement systems from around the world – visit: The Organization for Economic Cooperation and Development (OECD) (Pensions).
Article contributed by Steff Chalk – Mr. Chalk has previously worked as an Investment Fiduciary with the Chilean Pensions System, served as consultant to the Turkish Self-funded Retirement System and as a USAID Consultant to the Finance Ministry of Kuwait and the Arab African International Bank.