Reforming retirement systems is a more urgent imperative globally as the coronavirus pandemic claims jobs, lowers economic growth and investment returns, and threatens to choke funding for already underfunded pension plans. The pandemic is also hastening the imminent insolvency of the Social Security Trust Fund in the U.S., a recent report by the Penn Wharton Budget Model has found. In two recession scenarios the report laid out, the trust fund would run out of money in 2032 or 2034 – between two to four years earlier than pre-pandemic projections.

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But there is still hope for retirees, if policymakers, employers, and plan sponsors can purge retirement systems of their drawbacks and bring new financial products to fund them, according to a recent research paper by Olivia S. Mitchell, Wharton professor of business economics and public policy and executive director of the School’s Pension Research Council. Retirement systems must also provide for the long-term care needs of retirees, and build on recent moves to cover “gig economy” workers or freelancers, part-timers, and temporary workers, her paper stated.

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Mitchell’s paper breaks down the to-do list into two broad categories: the “accumulation” state when pensions are funded, and the “payout” stage when retirees can begin to draw from their accounts.

Fixing the ‘Accumulation’ Stage

For the accumulation stage, to begin with, Mitchell called for separating pensions and health care from employment. That would dramatically expand coverage to all citizens, irrespective of whether or not they hold a job. The 2019 SECURE Act helped remove a related obstacle by allowing firms to band together to offer benefits to employees who may work for multiple employers.

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