Why The U.S. Retirement System Gets A C+ Rating

About this Video

• Video Title: Why The U.S. Retirement System Gets A C+ Rating
• Channel: CNBC
• Speakers: The transcript does not name the speaker(s).
• Duration: 12:27

Introduction

This CNBC video analyzes the U.S. retirement system, giving it a C+ rating based on the Mercer CFA Institute Global Pension Index. The video compares the U.S. system to other countries, highlighting its strengths and weaknesses, and discusses potential improvements.

Key Takeaways

• Low Coverage and Participation: The U.S. 401(k) system is voluntary, resulting in low participation rates (53%) despite high access rates (70%). Mandatory contributions in other countries are contrasted.
• 401(k) Leakage: Many Americans withdraw money from their 401(k) accounts before retirement (leakage), significantly impacting long-term savings. This is estimated to have cost between $60 and $105 Billion in 2019.
• Defined Benefit vs. Defined Contribution: The video contrasts defined benefit plans (like Social Security, providing consistent payments) with defined contribution plans (like 401(k)s, offering lump sums), pointing out the challenges of managing lump-sum withdrawals.
• High Retirement Incomes Despite Flaws: Despite the C+ rating, U.S. retirees generally enjoy higher incomes than those in many other developed countries due to higher overall savings. Average figures are noted as potentially misleading, given the significant number of retirees with zero savings.
• Gender Disparities: The video notes that women are disproportionately affected by early withdrawals and poor retirement planning, often facing poverty and downward mobility in widowhood or divorce.