America Grades C+ on Retirement

A ranking suggests Americans may be less prepared for retirement than OECD peers

As the global economic outlook for this year and next weakens and risks of global recession rise, Americans may be less prepared for retirement than many of their peers from other OECD countries, according to an annual ranking by Mercer and the CFA Institute.

Research by Charles Schwab, one of America’s top retirement plan providers, found less than half of surveyed workers with an employer-sponsored retirement plan expect they’ll be able to meet their retirement goals. And with worries about inflation, the economy, and market volatility growing, those anxieties are leading more Americans to tap Social Security funds early on concerns they might be depleted.

Key Takeaways

  • The U.S. got a C+ grade in a ranking of international retirement systems.
  • Pre-retirement leakage played a role in the ranking, as worries about Social Security running out are driving more Americans to tap benefits early.
  • Less than half of employer-sponsored retirement plan holders surveyed by Charles Schwab think they’ll be able to reach retirement goals.

US Retirement System Ranks Below Most OECD Peers

A 2022 ranking of retirement systems around the world suggested the U.S. might be less prepared than some of its peers, earning a C+, with only three OECD countries ranked behind the U.S. This grade, which it shared with France and Spain, was described as a “system that has some good features, but also has major risks and/or shortcomings.”

Overall, the U.S. placed 20th out of 44 systems featured, and received its weakest subscores on factors surrounding regulation and operating costs. Finland and Norway scored the highest in that category, while the Philippines and Argentina scored the lowest.

The report by Mercer and the CFA Institute also pointed to wide disparities as well as a propensity for pre-retirement leakage as retirees tap funds early for the score. 

Tapping Social Security Benefits Early 

Recent studies suggest amid rising worries about inflation and the future of the economy, a growing number of adults plan to access Social Security benefits early, in part due to rising fears they could run out. 

Forty-two percent of adults surveyed by Nationwide this summer said they plan to tap Social Security benefits early, up from 36% in 2021, with an overwhelming 70% majority saying they’re worried Social Security will run out in their lifetimes. A third or 33% of those not currently receiving Social Security benefits said they worry they might not get any benefits earned by the time they retire.

Last week, the Social Security Administration announced its largest annual cost-of-living adjustment (COLA) in four decades at 8.7% with inflation lingering near multi-decade highs.

The COVID-19 Pandemic’s Lingering Impacts

Nationwide also found that respondents were even more concerned about the pandemic's impact on their retirement plans this year than they were last year, with 20% of non-retired Americans saying they are pushing back their retirement start date due to COVID-19 this year, compared to just 15% in 2021. Another 47% said they are re-evaluating their retirement plans because of the pandemic’s financial impact, up from 38% last year.

An analysis of employer-sponsored retirement plans by Charles Schwab, one of America’s top plan providers, found less than half of those surveyed expect they’ll be able to meet their retirement goals. Respondents said they expect their 401(k) to be their primary financial resource in retirement, contributing about 37% of income, followed by Social Security at 17%.

Even Millionaires Are Worried About Retirement

Even among investors with over $1 million in investable assets, close to half or 44% are worried about being able to retire when they want to, according to a report released earlier this week by Natixis Investment Managers. Over half expect they may have to work longer than they planned before retiring, while about a third or 35% felt “it will take a miracle” to achieve a secure retirement. 

“Those hoping to retire need a new playbook, including education, planning, tools, and policy to meet the retirement crisis,” said Natixis Executive Vice President and Head of Retirement Liana Magner in a release.

The standard 4% rule for retirement drawdowns, for example, might end up providing less income than most respondents are used to living on, according to Natixis. A recent analysis by Bank of America also found that those who followed the traditional 60/40 portfolio rule have seen their annualized returns sink 34.4% so far this year, the worst in a century.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Mercer. “Mercer CFA Institute Global Pension Index 2022.”

  2. International Monetary Fund. “World Economic Outlook Report October 2022.”

  3. Charles Schwab. “2022 401(k) Participant Study.”

  4. Nationwide. “New Study: More Than Two-Thirds of Americans Don’t Know that Social Security is Protected Against Inflation.”

  5. Bureau of Labor Statistics. “Consumer Price Index Summary.”

  6. Social Security Administration. “Cost-of-Living-Adjustment (COLA) Information for 2023.”

  7. Natixis Investment Managers. “The Million Dollar Question.”

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.