Pension systems aim for sustainability, adequacy, and appropriateness, but are often hindered by unfavorable demographic conditions, labor market challenges, and macroeconomic occurrences. The objective of the thesis is to position the Republic of Croatia, through the methodological framework of cluster analysis using Ward's method, within a group of comparable and homogeneous EU member states based on the characteristics of pension system sustainability, adequacy, and appropriateness in order to identify similarities and differences in pension systems. In addition, the research will enable a better understanding of the key challenges facing the pension system of the Republic of Croatia. EU member states are clustered based on values of demographic indicators, macroeconomic indicators, labor market indicators and pension system indicators, and the results confirm that successful values of these indicators are the foundation of a successful pension system; therefore, directing countries towards improving the analyzed indicators can be a step towards sustainability. The results indicate the unsustainability of the Croatian pension system due to labor market challenges and high dependency rates, and inadequate pensions caused by low replacement rates. As demographic aging issues affect almost all of Europe, the intergenerational solidarity system becomes unsustainable, and changes in pension system structures become necessary and urgent. Pension systems are a reflection of the economic condition and require active management to achieve long-term financial stability for the elderly population.