Should the US require mandatory retirement contributions besides Social Security? - CNBC.com
The United States received a C+ in the 2024 Mercer CFA Institute Global Pension Index because it relies heavily on voluntary savings plans. Other countries require mandatory contributions to personal retirement savings.
There are two types of retirement plans, and they function differently. One type is a “defined contribution plan,” such as a 401(k), in which employees determine the amount to contribute. It works like a bucket. The amount you have at retirement depends on the amount of contributions and investment returns. The outcome is left uncertain. The second type is a “defined benefit plan,” which resembles a faucet and includes Social Security and employer-sponsored pensions. Both provide a steady stream of income in retirement, based on wages and years of employment. Employers and the Government handle the risks, while employees receive a predictable monthly income, usually for life.
The Netherlands and Australia both require employees to pay into defined contribution plans, and the Netherlands frequently receiveed a top score in the index. This CNBC.com article by Charlotte Morabito (click here …. ) provides additional background on this topic.
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