Americans always like to consider themselves first in just about everything, so news that the U.S. ranks 19th in retirement security may come as very disappointing to many. But that is where the recently published 2015 Natixis Global Retirement Index places the U.S. — a spot it has held steady for three years running.
The Natixis Global Retirement Index is based on an analysis of four key trends across four broad categories: finances in retirement, health, quality of life, and material well-being.
“We look at each of those individually and then we combine the score, which is where we derive the rankings from,” said Ed Farrington, executive vice president Natixis Global Asset Management.
Topping this year’s ranking was Switzerland, followed by Norway, Australia, Iceland, the Netherlands, Sweden, Denmark, Austria, Germany, New Zealand, Luxembourg, Canada, Finland, Republic of Korea, the Czech Republic, Belgium, Japan, France, and the United States.
The study found that that the U.S. got strong grades for its finances, largely due to low inflation and interest rates, and enjoyed higher gross domestic product growth, but its position in the rankings may still be fragile. A key factor is its out-of-balance healthcare system.
For example, “the U.S. benefits from high per-capita income and spends more per capita on healthcare than any other nation. However, those resources don’t reach all Americans. The U.S. has a relatively large gap in income equality, and Americans have access to fewer doctors and hospital beds than citizens in other developed nations,” the study summary reported.
Ranked 19th, and Holding
To be fair, placing 19th in a ranking of 150 nations worldwide is no shabby feat. But the U.S. appears stuck there, while some other countries have shown improvement over the three years of rankings.
“Out of 150 it’s a place where you say, ‘that’s fine’,” Farrington said. “But I think as a nation we strive for better, and one of the things that certainly goes against us is that, while we’re number one in per-capita spending on healthcare, it doesn’t always translate into the outcomes you’d expect. One of the outcomes we point to is that it hasn’t translated into improved life expectancy. So while we’re spending a lot of money in that space, we’re not necessarily getting the results.”
Farrington said he is not surprised that the U.S. didn’t rank higher in the study, this year or in the prior two.
“Let me provide a little color around that. If you look at the four different categories, historically the best environments have been when there are three legs to the financial stool. Those legs would be participation from the government, participation from an employer, and obviously participation from the individual. We’ve seen over the last 30 years more of the responsibility in the U.S. falling on the shoulders of the individual,” Farrington said.
“One of the reasons being as we have an increasing debt load, the systems [in place] such as Social Security and Medicare are not as predictable or reliable as we might have hoped,” Farrington said. “More and more you’re seeing that burden shifted to the individual, they’re going to have to put away more money, and they need more incentive to put away more money. And we haven’t seen a dramatic change in policy over the past several years. That’s my overall reason for saying I’m not shocked. “
Great News From the Scandinavian Region
The fact that so many of the Scandinavian countries scored so well on the index was not lost on Farrington.
“I think there are two clear categories where they do well,” Farrington said. “From the health side, they have well-funded and broad access to healthcare. And secondly, the equivalent of Social Security is well-funded and projects better for a longer period of time in terms of what people can expect for participation from the state.
“That being said, I do think when you’re looking at an economy and a political system as complex as the U.S., it may not always be a completely fair analogy. For example, we saw Iceland move dramatically this year. That was the result of having a very difficult time in the financial crisis, but very quickly taking steps to correct that, and we see those gains with their banking system becoming much more reliable and more predictable over the last year. In contrast, if you look at the size and scale of the U.S. economy versus some of these smaller countries – it’s the equivalent of trying to turn a tanker versus a sports boat – it’s a little easier to move a smaller boat.”
Another important factor in how quickly and easily a nation can act on retirement related issues is local politics.