Retirement as the previous generation has known it is taking a beating thanks to diminished incomes, a need to tap into 401(k)s early and ongoing battles over how long the government can continue to fund entitlement programs such as Social Security and Medicare. But some may be shocked to find out how the United States stacks up against other nations when it comes to the quality of its citizens' retirement.
The United States came in 19th place for retirement quality in a new study released today by Natixis, a global investment management company. The study looked at a number of publicly available data points for 150 countries, including health (e.g. physicians per 1,000 people), material well-being (e.g. unemployment and income equality), finances (e.g. inflation index) and quality of life (e.g. pollution rates and recorded happiness). Norway, Switzerland and Luxembourg took the top three spots.
"I'm surprised the United States didn't do better," said Tracey Flaherty, Natixis Global Asset Management's senior vice president for government relations and retirement strategies. "I think there is a real opportunity for the U.S. to address some of these things and move up in the rankings. It's a conversation we need to have now while we can take action."
Health care is one area the United States didn't perform so well in, ranking lower on available hospital beds and physicians per 1,000. While the U.S. is just getting started on having policy discussions on how to reduce the cost of healthcare, the countries who bested the U.S. are much further along.
Health care expenses can cripple one's retirement savings. According to a Senate report, there is a $6.6 trillion gap between what people need for retirement and what they have saved. "The reason why people have underfunded retirement is because health care needs get incrementally more expensive as you get into your retirement years.
"Most of the developed nations are wrestling with the challenging combination of an aging population, longer life expectancies and falling birth rates," Flaherty told Huff/Post50. "We see a looming crisis out there if we don't act on some of these things sooner rather than later."
The study's findings shine a harsh light on the problems facing retirement, what Flaherty described as a "three-legged stool": government, employers and "what individuals can do on their own," she said.
"The demographic trends within the developed nations are changing," Flaherty explained. "Globally the number of workers per retiree will shrink by more than half in 2050 from nine workers per retiree to four. We have a confluence of these factors that are creating what could be a crisis around the world with these underfunded pensions," upturning the previous trend of having more workers to put money in than retirees taking it out. By shoring up Social Security, the United States can begin to address this shifting dynamic, Flaherty said.
For the employer pillar, Flaherty said the U.S. needs to offer more Americans the opportunity to contribute to a workplace savings plan.
"We have 75 million Americans who aren't able to participate ... we need to look into extending the 401(k) to part-time and other small businesses," she said.
Market volatility has eroded the confidence of seven out of 10 investors, Flaherty told Huff/Post50. "As a result investors have been a little gun shy about putting money into the market. If you're 60 and you're going to live to 85, that's still a long time to be out of the equity market. As individuals start to relook at their needs and their portfolios, not only do they need to be more active about managing risks and taking the right kind of risks, they need to be able to meet their retirement needs over the long term."
Flaherty said that the conversations around entitlements and health care are happening in Washington, but substantive policy change has to happen. The study's findings present "a real opportunity for the U.S. to address some of these things and move up in the rankings," she said.