The US retirement system need to evolve, says TIAA Institute

The US retirement system need to evolve, says TIAA Institute
As lifespans get longer and workers' access to DB plans decrease, researchers make the case for a "hybrid" system to support retirees.
SEP 10, 2024

A new report from the TIAA Institute is calling for significant reforms to the US retirement system, emphasizing the need for a modernized approach to address the evolving challenges faced by today’s retirees.

The report, titled The Future of Retirement Security, examines the retirement systems of seven countries, highlighting how they have transitioned from defined benefit to defined contribution plans. 

As life expectancy increases and fewer employees have access to traditional pension plans, many nations are grappling with the challenge of funding longer retirements. According to the report, the average retiree now spends about two decades in retirement—roughly double the time expected 50 years ago. With four in 10 Americans at risk of outliving their savings and 57 million workers lacking a retirement plan, it highlighted the urgency of developing an evolved system that considers how times have changed.

"Life expectancy has risen by 17 years in the United States since the Social Security program debuted nearly 90 years ago," said Surya Kolluri, head of the TIAA Institute, in a statement. "This comes with tremendous opportunities, but it also comes with headwinds."

The report suggests that the most effective retirement system, one that's both sustainable and secure, should be a "hybrid" that blends the best of both DB and DC plans.

Such a plan should bring together several key attributes, the report said, including universal access to retirement plans, higher contribution rates, risk sharing between stakeholders, strong fiduciary oversight, and flexibility to accommodate changing work patterns.

Additionally, it emphasizes the importance of diversified income streams, such as annuities, to provide guaranteed income in retirement.

"In our vision for the future, all US workers are automatically enrolled into a robust, cost-effective retirement plan," said Bret Hester, executive vice president of TIAA. He added that defaulting workers into investment solutions that can convert into guaranteed income streams would be a crucial step.

The study analyzed retirement systems in the US, the UK, Canada, Australia, the Netherlands, Singapore, and Sweden, noting that each country balances adequacy, sustainability, and equity differently.

Latest News

Judge OKs more than $90 million in settlement money for GWG investors
Judge OKs more than $90 million in settlement money for GWG investors

Mayer Brown, GWG's law firm, agreed to pay $30 million to resolve conflict of interest claims.

Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs
Fintech bytes: Orion and eMoney add new planning, investment tools for RIAs

Orion adds new model portfolios and SMAs under expanded JPMorgan tie-up, while eMoney boosts its planning software capabilities.

Retirement uncertainty cuts across generations: Transamerica
Retirement uncertainty cuts across generations: Transamerica

National survey of workers exposes widespread retirement planning challenges for Gen Z, Millennials, Gen X, and Boomers.

Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future
Does a merger or acquisition make sense for your firm? Why now is the perfect time to secure your firm’s future

While the choice for advisors to "die at their desks" might been wise once upon a time, higher acquisition multiples and innovations in deal structures have created more immediate M&A opportunities.

Raymond James continues recruitment run with UBS, Morgan Stanley teams
Raymond James continues recruitment run with UBS, Morgan Stanley teams

A father-son pair has joined the firm's independent arm in Utah, while a quartet of planning advisors strengthen its employee channel in Louisiana.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave