Our retirement system gets a C-plus; policymakers have an opportunity to make it A grade

The American retirement landscape presents a sobering reality: millions of workers lack adequate savings for their golden years, while countless others struggle to navigate the path to retirement security. President Trump's recent endorsement of Australia's retirement system as a potential model for U.S. reform creates a unique window of opportunity that policymakers must capitalize on.

The modern retirement journey illustrates the challenges ahead. Today's entry-level employees benefit from automatic 401(k) enrollment—a significant advancement in retirement policy. However, projecting decades into the future reveals a concerning scenario: these same workers will likely navigate multiple job transitions, accumulate fragmented retirement accounts, and ultimately confront the fundamental question plaguing American retirees: Is this sufficient?

This experience reflects broader demographic and economic trends reshaping retirement security. Extended lifespans, evolving career patterns, escalating living costs, and constrained government resources are fundamentally altering retirement planning requirements. While the SECURE Act of 2019 and SECURE 2.0 Act of 2022 delivered meaningful improvements, significant gaps persist in longevity protection, savings adequacy, and coverage breadth. As 401(k) and 403(b) plans serve as the primary retirement vehicles for most Americans, comprehensive reform becomes increasingly critical.

The Mercer CFA Institute Global Pension Index provides valuable context by evaluating retirement systems across more than 50 countries based on adequacy, sustainability, and integrity metrics. The United States demonstrates strong performance in integrity measures but consistently underperforms in adequacy and sustainability—precisely the areas where reform could deliver immediate impact.

This performance gap places America in the middle tier of global retirement system rankings, while countries like Australia consistently rank among the top performers. Without strategic reform, growing numbers of Americans face retirement with insufficient income streams and limited tools to effectively manage their accumulated savings.

Strategic Reform Priorities

1. Converting Savings to Sustainable Income Streams

Accumulating retirement savings represents only half of the retirement security equation. The more complex challenge involves transforming 401(k) balances into reliable income streams that provide security throughout extended retirement periods. Currently, workers frequently cash out small accounts during job transitions rather than executing proper rollovers, permanently reducing their retirement resources.

With Americans over 60 projected to double by 2050, longevity risk extends far beyond theoretical concerns. Streamlined rollover procedures and enhanced disclosure requirements would significantly improve workers' ability to preserve retirement assets and plan for potentially three-decade retirement periods.

2. Addressing Coverage Disparities

Retirement savings access remains highly uneven across the American workforce. Younger employees, part-time workers, and individuals with caregiving responsibilities face the greatest disadvantages, often lacking clear guidance on retirement preparedness.

Three targeted interventions could substantially reduce these coverage gaps: implementing automatic re-enrollment for workers who previously opted out of retirement plans; expanding coverage to workers under 21, building upon SECURE Act provisions for part-time employees; and establishing special catch-up contribution allowances for caregivers who temporarily exit the workforce. These modifications would broaden access while supporting workers most vulnerable to retirement savings shortfalls.

3. Investment Platform Modernization and Risk Reduction

In 2025, President Trump issued an executive order directing regulatory agencies to reduce restrictions on private market investments within 401(k) plans, following Australia's established approach. Providing savers access to private equity, venture capital, and digital assets could enhance portfolio diversification and return potential. However, many employers await clear regulatory guidance regarding fiduciary safe harbors, liquidity requirements, and fee structures before implementation.

Extending collective investment trust access to 403(b) plans—currently available only to 401(k) participants—would reduce costs and expand options for millions of government and nonprofit employees who remain underserved.

Litigation risk has emerged as a significant implementation barrier. Employer-sponsored retirement plans face increasing lawsuit frequency, necessitating targeted policy interventions that discourage frivolous litigation while preserving legitimate legal recourse.

Preserving Traditional Pension Systems

While new retirement contributions predominantly flow into 401(k) and 403(b) plans, substantial existing retirement wealth remains in traditional defined benefit pensions. Comprehensive system modernization must support rather than undermine these established vehicles.

Reducing Pension Benefit Guaranty Corporation (PBGC) premium rates would incentivize continued employer sponsorship of defined benefit plans. Enhanced flexibility in deploying surplus defined benefit assets could benefit both participants and plan sponsors.

Policymakers should also support defined benefit designs that reduce sponsor financial volatility, including pooled employer plans that enable smaller organizations to provide pension benefits cost-effectively.

Implementation Imperative

Effective retirement policy reform extends beyond international ranking improvements to ensure future generations can retire with financial dignity despite increasingly complex career patterns and extended lifespans.

The outlined reforms—expanding lifetime income options, eliminating coverage gaps, modernizing investment regulations, reducing litigation risk, and strengthening pension protections—would create a more resilient and equitable retirement system. The current policy environment presents a rare opportunity for meaningful reform. Policymakers must act decisively to capitalize on this moment and deliver lasting improvements to American retirement security.