There are 16 other developed nations where retirees are financially better off than that of the United States, and four in 10 Americans say “it will take a miracle” for them to retire securely.
The 2021 Global Retirement Index (GRI), released this week by Natixis Investment Managers, shows the U.S. slipped one spot to No. 17 in the ninth annual index, a snapshot of the relative financial security of retirees in 44 countries.
The study finds that many Americans feel their retirement dreams are slipping away, notably as a result of the macro-economic consequences of the COVID-19 pandemic including increased government debt, rising inflation and persistently low interest rates. Savers are shouldering a growing share of the responsibility for funding their retirement and are increasingly looking to the private sector and financial advisors for help.
Iceland tops the rankings for third consecutive year. Switzerland, Norway, Ireland, Netherlands, New Zealand and Australia all slipped slightly in retirement readiness but still maintained spots two through seven, while Germany, Denmark and Canada rounded out the top 10.
The U.S. moved down one place from last year with lower scores in health, happiness, and government debt, and a higher ratio of retirees to workers.
Overall, 41% of American respondents, including 46% of Generation Y, 45% of Generation X and 30% of Baby Boomers, believe they will need a miracle to be able to retire securely.
“The pandemic has exacerbated financial inequality and accelerated long-term trends that are eroding the prospect of retirement security for many,” said Jim Roach, Senior Vice President of Retirement Strategies at Natixis Investment Managers.
Nearly six in 10 U.S. investors believe income inequality is detrimental to overall retirement security, and most think private sector businesses have a role in helping Americans save for retirement. The survey found 73% recognize that it is increasingly their responsibility to fund their retirement versus relying on a pension or Social Security.
Speaking of Social Security, three-quarters (77%) of Americans in the survey think that rising government debt will lead to reduced Social Security benefits, and 42% say it will be difficult to make ends meet if Social Security benefits are lower than expected. That included 31% of those with a net worth of $1 million or more.
More key findings in the survey:
• Nearly six in 10 (59%) accept that they will have to keep working for longer, while 36% believe they will never have enough money to retire. This includes 51% of Generation Y, 48% of Generation X and 20% of Baby Boomers.
• Two-thirds (68%) see long-term inflation as one of the biggest risks to their retirement security, while 64% worry that healthcare costs will eat up their savings.
• Half (50%) are concerned that low interest rates will make it harder to generate income in retirement.
Global view of retiree wellbeing
The GRI examines 18 performance indicators of retiree welfare grouped into four thematic sub-indices: material wellbeing, finances in retirement, health and quality of life.
The top-ranking countries by sub-index are Iceland for material wellbeing, Singapore for finances in retirement, Japan for health and Finland for quality of life. Four of the five top-ranked countries for quality of life are Nordic countries.
The GRI calculates the performance for each country on these criteria, resulting in a composite score that provides a comparative tool for evaluating retirement security globally, as well as identifying drivers of changes in each country’s score and ranking.
While the top seven spots in the global rankings are unchanged (albeit with slightly lower scores than last year), Germany moved up two places to No. 8, swapping places with Canada which slipped to No. 10 while Denmark held on to its place at No. 9.
All of the top 10 countries in the Index are characterized by either balanced performance across all four sub-indices or particularly strong performance in at least three sub-indices to make up for lagging performance in another.
Fifteen of the top 25 countries have the same overall ranking as last year, and 19 are in the Europe, Middle East and Africa (EMEA) region.
No new countries entered or exited the top 25, and movement up or down is mainly limited to changes of two spots or fewer. Slovenia is the only country among the top 25 to move three places, improving to No. 16 from No. 19 last year and up from No. 21 in 2019.
Luxembourg moves up two spots to 11th while Sweden moves down two places to 13th. The U.S., U.K., Israel, and South Korea all slip down one spot to 17th, 18th, 19th and 23rd respectively while Japan moves up one place in the rankings to 22nd.
U.S. scores fall in 3 of 4 sub-indices
The U.S. ranked No. 11 for finances in retirement; No.17 in health; No. 21 in quality of life and No. 26 in material wellbeing—the last one being the only one to show improvement from the previous year.
The drop in finances in retirement was driven by lower scores in tax pressure, old-age dependency, governance, government indebtedness and bank nonperforming loans.
The U.S. health ranking fell due to a lower score in life expectancy; and quality of life fell as a result of lower scores in happiness and environmental factors. In material wellbeing, the only sub-index in which the U.S. does not rank among the top 25 nations, it scored slightly higher for income per capita and income equality.
Among all 44 countries in the Index, the U.S. has the highest health expenditure per capita, the sixth highest income per capita and the sixth lowest score for government indebtedness.
SEE ALSO:
• U.S. Rises in 2020 Global Retirement Index
• The ‘World’s Best Place to Retire in 2021’ is…
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
