Tracey Flaherty, NGAM’s senior vice president for government relations and retirement strategies, told PLANSPONSOR there were a number of factors for which the U.S. ranked poorly, several in areas of health care. “Given how much we spend on health care, it’s surprising we don’t do a better job. We also need to tie U.S. health care efforts into retirement measures, since health care costs are inextricably linked with retirement,” she said.
Though the U.S. is the world’s biggest pension market, it lags behind less-affluent nations on measures of income and health, according to the index. While the U.S. leads the world in per-capita health spending, individuals are still required to pay a portion of this expense on their own. That leaves many health costs in the hands of retirees and takes resources away from their other needs.
In contrast, Western European nations–backed by robust health care and retiree social programs–dominate the top of the rankings, taking the first 10 spots. Norway is first overall, followed by Switzerland, Luxembourg, Sweden and Austria. Australia is the highest-ranked non-European country, followed by Israel and Canada. The U.S. finished ahead of the United Kingdom, but trailed the Czech Republic and Slovakia.
“Given that the U.S. ranking in the Index is not isolated to just one factor, but to many, a multilayered approach will definitely be needed for improvement in the future,” said Flaherty.
Like many other nations, the U.S. is grappling with significant demographic change, including a rapidly aging population, rising life expectancy rates and declining birth rates.
Globally, the number of people aged 65 or older is on track to triple by 2050. By that time, the ratio of the working-age population to those over 65 in the U.S. is expected to drop from 5-to-1 to 2.8-to-1.These trends are likely to diminish the government’s ability to finance programs such as Social Security and Medicare, and will mean a heavier financial burden going forward for individuals saving for retirement.
Retirement Savings Deficit
The economic downturn has also taken a major toll on retirement savings. According to a recent U.S. Senate report, the country is facing a retirement savings deficit of $6.6 trillion, or nearly $57,000 per household. As a result, 53% of American workers 30 and older are on a path that will leave them unprepared for retirement, up significantly from 38% in 2011.
Compounding the issue, only half of all workers have access to employer-sponsored plans, and those who do participate often make the common mistakes of saving too little or investing too much in lower-returning products.
“Seventy-five million U.S. workers are not covered by retirement plans like 401(k)s,” said Flaherty. “We need to extend such coverage to all workers. While we’ve moved ahead a lot over the past 20 years in terms of workers participating in retirement plans, the number of participants needs to be higher.”
The findings also suggest that Americans will need to pick up a bigger share of their retirement costs–especially as the number of retirees grows and the government’s ability to support them fades.“The bottom line is that U.S. workers, like many of their counterparts across the globe, have to step up even more and take charge of their retirement futures,” said Flaherty.
The Natixis Global Retirement Index gauges how well retired citizens live in 150 nations by measuring several factors. According to data obtained by PLANSPONSOR from David Snowden, vice president of public relations at Natixis, this included a “Health in Retirement” measure using data on life expectancy, health expenditure per capita, number of physicians and hospital beds and noninsured health expenditure from the World Bank and World Health Organization. Measures of unemployment, income and income equality for each country were also used.In addition, World Bank data on old-age dependency, inflation, interest rates and tax pressure were also factored into the Index. And finally, environmental quality of a country using data from the Environmental Performance Index 2012 and the Ladder of Life question from the Gallup World Poll 2012—which asks individuals in different countries about their level of happiness and satisfaction with past, present and future life—were used in the Index.