TIAA Institute Study Highlights Swiss and Chilean Retirement Models for US Reform

A recent report by the TIAA Institute analyzes retirement systems across 11 countries, highlighting Switzerland and Chile as models for U.S. retirement security reform. These countries have effectively integrated annuity options within their retirement plans, achieving annuitization rates between 50% and 60%, compared to consistently low rates below 10% in systems where annuitization is voluntary and requires independent decision-making. The report underscores that integrating annuitization into the retirement plan framework, rather than treating it as a separate decision, significantly improves adoption rates, providing a blueprint for enhancing U.S. retirement outcomes. The study evaluates various dimensions of retirement systems including adequacy, financial sustainability, fairness, and plan design, covering nations such as Australia, Canada, Germany, Japan, Singapore, and others. Switzerland and Chile employ a hybrid model combining aspects of defined benefit (DB) and defined contribution (DC) plans to balance retirement income adequacy and financial sustainability. Chile’s government-run SCOMP platform allows retirees with sufficient balances to choose annuities, programmed withdrawals, or a combination thereof, while Switzerland offers annuities directly through retirement plans with options between income, lump sum, or hybrids. The report identifies five critical elements for successful hybrid retirement systems: universal participation in quality plans, adequate contribution rates, equitable risk-sharing among stakeholders, flexibility suited to modern work patterns, and strong fiduciary oversight. These elements enable retirement systems to accommodate increasing lifespans and evolving employment trends. Incorporating these features can promote sustainable lifetime income and improve participant decision-making confidence. In the U.S., annuity options remain limited in private defined contribution plans, contributing to low annuitization rates during retirement. The TIAA report suggests U.S. policymakers consider integrating annuity options directly into retirement plans to increase adoption and retirement income security. This reflects a growing international shift toward hybrid retirement models that blend guaranteed income features with the flexibility of DC plans. The report's findings highlight the importance of design innovations and regulatory considerations to address retirement income challenges in aging populations. By learning from international best practices, the U.S. retirement system can better support retirees in converting savings into sustainable income streams. The full report is available on the TIAA Institute's website for further policy and industry insights.