Global View of Retirement Living is Bleak

At least 40% of participants polled by The Principal in the United States, Italy, Germany, Brazil, Japan, and France believe their standard of living will be lower in retirement than it is currently. Further, the percentage of respondents giving this response has increased between 2003 and 2004 in eight out of the 12 countries surveyed, most notably in the United States, where 49% now have a more pessimistic outlook on retirement compared to 29% in 2003, according to the latest Global Financial Well-Being Study.

The Principal also found only a minority of participants in each of the countries surveyed are very confident that they will have enough money to take care of their basic needs during their retirement. While participants in the U.S. are relatively optimistic, where 24% said they are very confident that they will be able to afford basic expenses in retirement, more optimistic are citizens of China (36%), India (36%) and Great Britain (28%) while particularly downtrodden are survey respondents in France (13%), Italy (8%) and Japan (3%).

One reason for the gloomy outlook may be due to the perspective of diminishing future retirement returns, as many survey participants realize that their defined benefit government systems, such as Social Security, are ailing, and can no longer be relied on. Only one-third of survey participants in the United States, Brazil, and Italy are very or somewhat confident that these programs will continue to provide an equal level of benefits to those received by retirees today. About one-fourth in France (28%) and Germany (26%) have this level of confidence, while less than two in 10 British (19%) and Japanese (18%) participants report being confident about an equal level of continuing benefits.

This lack of trust in their governments’ ability to deliver on retirement benefits is matched by participants’ lack of faith in the companies for which they work. Survey participants do not trust their employer to deliver on retirement benefits promised to them. This absence of trust is most prevalent in Japan, where only 36% of respondents are very or somewhat confident that they will receive the full benefits from their employers’ retirement funds. But even in countries with the highest levels of overall confidence -Hong Kong (75%) and Great Britain (71%) – just one-third are very confident that they will receive the benefits they are entitled to.

Lack of Education

Another reason for the poor level of participation, and subsequent fears about a comfortable retirement, is a world “devoid of a financial planning culture,” Principal found. Simply put, people are not doing enough to plan for retirement, because most simply do not know what to do.

Many participants say they receive no financial or retirement planning advice from any source. For example, in Japan, more than 80% of respondents receive no financial or retirement planning advice and more than half of Mexicans and Italians are in the dark when it comes to financial advice. Some 40% of Brazilians, British and Indians are also in the dark.

Additionally, only a few survey participants report they currently have a professional advisor for financial and retirement planning or investment advice. German (39%), British (37%), and French (30%) participants are more likely than others to indicate they have a professional advisor, while Chinese (2%) and Japanese (1%) participants are least likely to report having one.