The Competitiveness of the Three Pillars of Retirement Income in the United States
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This research paper examines the three pillars of retirement income in the United States to determine its competitiveness with other countries that are members of the Organization for Economic Cooperation and Development (OECD). Specifically, it looks at historical data from Australia, the United Kingdom, the Netherlands, and the United States. Due to the retirement crisis currently taking place, it is important to see how plans in the U.S. compare to other countries, and what possible changes can be made. After determining the competitiveness, this paper concludes with a recommendation to improve benefits for retirees. The paper begins with a review of literature used to understand theories needed to make a fair comparison. It starts with broad seminal theory of why people save which helps show why countries have such different savings rates. Next, it looks into the three pillars of retirement that are used as vehicles for retirement. Pillar I and II are looked at specifically to see how they affect private savings rates, thus giving a numerical value that can be examined and compared in each country. Finally, the literature review looks at Solow's growth model to understand the relationship between private savings and economic growth. The literature review is followed by a connection section linking these theories to the method used in the research. Then, specific plans are looked at in the countries of interest and the theories are applied to predict what will happen to private savings based on each plan. Historical data on private savings rates, Gross Domestic Product, population, average retirement ages, and more figures are pulled to find the most successful country. Finally, it is determined if the United States is still competitive with other OECD countries and a recommendation is made for policies moving forward.