A Global View of Retirement Shows How U.S. Savers Stack Up

Retirement readiness can be expected to continue to increase gradually in the United States, thanks to legislative actions at both the federal and state level, but in the absence of concerted action on the part of the financial services industry, readiness will likely remain lower than in many other developed countries.

This is one of the key findings in a new analysis published by Smart, an international technology firm that bills itself as “one of the world’s fastest-growing technology providers changing the face of retirement.”

As the report explains, some states, such as California, Illinois and Oregon, have introduced their own mandates for employers to offer their employees access to a retirement plan, and these mandates continue to expand. California, for example, extended its mandate to cover even the smallest employers beginning in July 2022.

Smart’s analysis suggests such measures, buoyed by an increasing focus on retirement planning issues among U.S. financial advisors, should help more Americans prepare adequately for life after work. However, as the analysis points out, there are as yet various ways in which the retirement systems of other nations outperform the American approach.

As such, according to Smart, all stakeholders in the U.S. retirement system — from financial advisors and service providers to the end investors — can benefit from a bit of global perspective. As Smart’s research shows, some perceptions about retirement appear to be universal, while others are influenced more by one’s national context.

A Global POV

Smart is a U.K.-originated retirement technology business working on expanding the pooled employer plan market in the United States. In the U.S., Smart is led by CEO Jodan Ledford, a U.S. retirement plan industry veteran who previously served as the chief client officer at Legal & General Investment Management America.

As part of the firm’s expansion efforts in the U.S., Ledford and his colleagues engaged closely in the advocacy efforts that led first to the passage of the Setting Every Community Up for Retirement Enhancement (Secure) Act in 2019 and then to the follow-up passage of the Secure 2.0 Act package late last year.

Both pieces of legislation drove significant changes to the U.S. retirement landscape, including making it easier for employers to adopt the type of pooled plan arrangements that Smart specializes in servicing. With its expansion in the U.S., the firm now has a strong presence across various English-speaking nations, especially the U.S., the U.K., Australia and South Africa.

This expanding point of view led the firm to publish its first Future of Global Retirement report in 2021, aimed at helping financial professionals understand people’s behaviors and attitudes about saving for retirement. This year’s updated report includes findings from more than 8,000 savers across the U.K., Australia, South Africa and the U.S.

Although the retirement landscape in each of these regions differs vastly, the firm identified some common trends and challenges.

The U.S. Retirement Landscape

According to Smart’s survey, this year’s financial environment has been challenging for retirement savers globally, with rising interest rates, high inflation and falling stock prices. This is likely to have exacerbated savers’ concerns about their ability to meet their retirement spending needs.

In the U.S., health care access and costs remain atop the list of worries when it comes to retirement planning, and that worry is growing, having reached 58% in 2023 compared to 45% in 2021. Notably, this concern jumps to 66% among those closer to retirement. Being able to afford day-to-day living costs continues to be the next most common concern (57%), jumping 16 percentage points since 2021.

According to the survey, more than two in five (43%) Americans between the ages of 45 and 54 expect their average monthly spending will go up in retirement, which reflects the widespread concern about the effects of inflation on day-to-day spending.

While men (49%) are more likely to expect their expenses to increase compared with women (37%), those who are closer to retirement are less likely to expect their spending to increase. According to Smart’s analysis, this may be because they have a better understanding of what their spending in retirement is likely to look like.

Almost four in five (79%) say that they understand their options for financing their retirement. This is up from just 54% in 2021, Smart reports, suggesting that the knowledge gap may be shrinking and that the retirement-focused work of financial professionals is paying off.