The slide continues. The United States slipped from 20th to 22nd place in the 2024 Global Retirement Index from Natixis Investment Managers, reflecting the cooling labor market and comparatively lower happiness score.
The survey, released today, finds nearly half of working Americans are worried they won’t have enough money to enjoy retirement, and a growing number (47%) now say achieving retirement security will take a miracle.
Globally, the study found retirement conditions remain steady this year, following improvements in retirement security across nearly all developed countries last year. The list of countries that rank in the top 10 of the index has remained the same for two consecutive years.
There is a new No. 1: Switzerland overtakes Norway at the top of the GRI with a score of 82%, dethroning Norway after it finished at the top for two years in a row. Norway did not fall far, only down to second place overall with a score of 81%, while Iceland and Ireland take third and fourth, respectively. The Netherlands, Luxembourg, and Australia follow closely behind, with all finishing within the top seven rankings as they did last year. Germany, Denmark, and New Zealand finish off the top ten, with New Zealand having the most significant change in the best performing countries, dipping two places to 10th overall.
The biggest movers in the index over the years include Ireland, which has ascended 21 places from 25th in 2013 all the way up to fourth this year (for the second year in a row). Singapore has also improved significantly, moving from 38thin 2013 to 25th in 2024.
Meanwhile, Sweden and Finland have seen large swings in the opposite direction, falling out of the top 10 from seventh and ninth in 2013 to 17th and 18th this year, respectively.
U.S. keeps falling
A look through the Index rankings since 2020 shows the U.S. has dropped further down the scale every year, from 16thin 2020 to 17th in 2021, 18th in 2022, 20th in 2023 and now 22nd this year, with its score falling from 71% to 70%.
“The United States continues to experience a ‘good news/bad news’ scenario for retirement security, with inflation slowly returning to normal while unemployment and public debt levels rise.”
Dave Goodsell, Natixis Center for Investor Insight
Israel (19), South Korea (20) and Malta (21) finished just ahead of the U.S., while Japan was 23, France 24 and Singapore capped the top 25.
The slip for the U.S. is attributed to a decrease in the Material Well-Being sub-index score due to increasing unemployment, and the Quality of Life sub-index score due to a comparatively lower score in happiness, especially in those under 30, over social connections. While the decline in those areas has reduced the America’s overall retirement security score, the U.S. is leading all other countries in GDP growth at 2.5%, driven by an influx of immigration. Further, as inflation has decreased to historical levels, the Fed has signaled the potential for interest rate cuts for the second half of the year, which could provide relief for borrowers.
Created in collaboration with Core Data Research, the GRI provides a global benchmark that incorporates a wide variety of factors essential for people to enjoy a healthy and secure retirement. These include important financial factors as well as considerations such as access to and cost of healthcare, climate conditions, the state of governance and the general happiness of the population. The GRI rankings are relative, not absolute, and are based on an aggregate of mean scores from 0% to 100% for 18 performance measures in each of its four sub-indices—Finances in Retirement, Material Well-being, Health, and Quality of Life—which are combined to provide an overall picture of the environment for retirees.
“Globally, we’ve seen a consistent set of results in this year’s index, though there is room for improvement to be made for most,” said Dave Goodsell, Executive Director of the Natixis Center for Investor Insight. “The United States continues to experience a ‘good news/bad news’ scenario for retirement security, with inflation slowly returning to normal while unemployment and public debt levels rise.”
Drilling down on U.S. rankings
For the four subindices, the United States ranks as follows:
• 15th in Finances in Retirement: The U.S. has little to no change in rankings due to improvements in tax pressure, interest rates, bank non-performing loans, and old age dependency, driven in part by the Federal Reserve’s decision to maintain interest rates to combat inflation, with potential rate cuts expected later in the year.
• 23rd in Quality of Life: The United States declined to 23rd place for Quality of Life, down from 21st as happiness among the country’s population declined, driven by a decrease in social connections, especially for those under 30.
• 24th in Material Well-Being: Despite the Federal Reserve’s success in balancing inflation and maintaining GDP growth, the country experienced a rise in unemployment due to fewer job openings and increasing layoffs. However, the U.S. has led in post-pandemic GDP growth, bolstered by immigration, and the Federal Reserve’s potential rate cuts later this year suggest their inflation battle is nearing its end.
• 27th in Health: The United States’ Health ranking, which slipped to 27th from 25th for the category overall, was mixed. While the country trailed most of its peers in life expectancy at 33rd, it maintained a perfect score in health expenditure per capita and is within the top four countries in insured health expenditure.
People on their own for retirement security
Despite the generally positive outlook for global retirement security, results from the long-running Natixis Global Survey of Individual Investors show that the number of individuals who believe it is increasingly their responsibility to fund retirement on their own, rather than rely on public and private pensions, grew from 63% to 77% between 2015 and 2023. Additionally, the number of individuals who believe it will take a miracle to achieve retirement security decreased from 41% in 2021 to 39% in 2023.
Over a quarter (27%) of investors said that even if they saved $1 million, they still couldn’t afford to retire—that includes 24% of those who have already accumulated $1 million.
The new report lists four key risks facing individuals today:
• Interest Rates: While low rates had been a key risk for retirees for the 15+ years following the Global Financial Crisis, today’s higher rate environment presents new risks. Most notably with more than $6 trillion invested in money market funds, certificates of deposit and similar instruments, they need to be aware of how today’s cash trap could keep them from meeting their need for a sustainable source of long-term income.
• Inflation: The worst of it may have passed as inflation slowly recedes toward central bank targets, but the post-pandemic bout of rising prices has served as a stark reminder of just how fast and how severe inflation can be. Now that 84% of investors say recent events reminded them of how big a threat inflation poses to their retirement security, investors will need to act accordingly to ensure they are prepared for any new episodes down the road.
• Public Debt: Public debt in OECD countries has more than doubled in the first quarter of the 21st Century as policy makers first navigated the Global Financial Crisis and then the Global Pandemic. While the steps were needed to stave off economic meltdown in the short term, policy makers are left with paying down long-term debt. A growing number of individuals are concerned they will be asked to pick up the tab and worry it will result in cuts to the government retirement benefits that are a cornerstone for their retirement income plans.
• Investors Themselves: A secure retirement is a journey not a destination. Success requires realistic expectations and meaningful commitment from individuals. While many may appreciate this in concept, not every investor sets makes reasonable assumptions and sets realistic goals. Natixis’ investor survey results show that investors do not have a consistent vision for what it will take to succeed.
“As individuals increasingly take charge of their retirement planning amidst these challenges, financial service providers must become more proactive in supporting them,” Liana Magner, Executive Vice President and Head of Retirement and Institutional in the U.S. for Natixis Investment Managers. “To prevent future crises, it’s crucial to offer personalized solutions that address both the current economic landscape and individuals’ specific retirement needs, including access to both public and private markets.”
To view and download a full copy of the report, visit: https://im.natixis.com/en-us/insights/investor-sentiment/2024/global-retirement-index
SEE ALSO:
• Inflation Fears Continue as U.S. Ranks 20th in Retirement Security
• Countries That Beat the U.S. in Retirement System Ranking
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.
