Norway, Switzerland and Iceland top annual retirement index

2017 Global Retirement Index Report

The United States fell three places to No. 17 among 43 countries in the 2017 Global Retirement Index, published today by Natixis Global Asset Management. That outcome highlights a growing concern for a country whose aging Baby Boomers represent a huge influx of new retirees supported by a smaller group of younger working-age adults.

Now in its fifth year, the Natixis Global Retirement Index seeks to provide a measure of how supportive the climate is for retirement across nations in the developed world. It creates an overall retirement security score based on 18 key drivers of retiree wellbeing across four broad categories: Finances, Health, Material Wellbeing and Quality of Life.

According to data compiled by Natixis, several factors affected the overall score for the U.S. (72%) in this year's index:
 
  • Lagging life expectancy in a healthcare-rich nation: The U.S. maintained its No. 7 ranking in Health, its highest among the sub-indices, in part because it spends more per capita on healthcare than any other country in the index, and it has the sixth-highest score for insured expenditure on health, which measures the portion of that expenditure paid for by insurance. However, the U.S. ranked only 30th in life expectancy, as Americans' longevity failed to keep pace with top-ranked Japan and other nations, suggesting its health expenditures may not be yielding the same return on investment.
  • Growing gap in economic opportunity: The U.S. has the fifth-highest income per capita among all nations in the index, but it registered higher levels of income inequality compared to last year, yielding the sixth lowest score for income equality in the Material Wellbeing category. The results suggest that millions of lower-income Americans are missing out on that economic growth and may struggle to save for a secure retirement as a result.
  • American retirees are less happy: The U.S. experienced a slight decline on Quality of Life measures since 2016, chiefly attributed to a poorer showing for the happiness indicator, which is based on surveys that evaluate the quality of retirees' current lives. However, the U.S. improved on environmental factors in part due to cleaner air.
  • Strength of financial institutions: The U.S. again ranked in the top 10 for Finances, largely due to improvements in bank non-performing loans and federal debt levels relative to other nations. However, the U.S. has the seventh-highest public debt as a percentage of GDP of all countries in the index, and an increasing ratio of retirees to employment-age adults (old-age dependency), putting pressure on government resources such as Social Security and Medicare. At the same time, low interest rates and tax pressures negatively affects savings rates and income in retirement.
"This year's Global Retirement Index is an important reminder that retirement security is a complex, multi-dimensional issue that is vastly influenced by a nation's policies, politics and economics," said Ed Farrington, Executive Vice President of Retirement for Natixis Global Asset Management. "The population is getting older, making retirement security one of the most pressing social issues facing the world. Factors such as increasing longevity, income inequality and the impact of monetary policy on personal savings and pension liabilities, are challenging the long-standing assumptions about how Americans plan for and live in retirement."

The Best Performers
The top 10 countries in the 2017 index include eight from Western Europe, including Norway at No. 1, followed by Switzerland, Iceland, Sweden, Germany (No. 7), Denmark (No. 8), the Netherlands (No. 9), and Luxembourg (No. 10). New Zealand (No. 5) and Australia (No. 6) complete the top 10. These countries benefit from a combination of strong social programs, widely accessible healthcare and low levels of income inequality.

On a regional basis, even though Western Europe dominates the top 10 rankings, Western Europe collectively ranks lower than North America (Canada and the U.S.). This reflects the challenges of other countries in Western Europe – mainly, Italy, Portugal, and Spain – as they continue to struggle with financial setbacks. The index also illustrates the "Great Divergence," as some economists call it, between Western Europe and North America, on the one hand, and the rest of the world on the other. North America's overall score was 73%, and Western Europe's was 70%. The next highest regions were Eastern Europe and Central Asia with a score of 50% and Asia Pacific at 34%.

Methodology
The Global Retirement Index assesses factors that drive retirement security across 43 mainly developed economies where retirement is a pressing social and economic issue. It was compiled by Natixis Global Asset Management with support from CoreData Research, a U.K.-based financial research firm. The index includes International Monetary Fund (IMF) advanced economies, members of the Organization for Economic Co-operation and Development (OECD), and the BRIC countries (Brazil, Russia, India and China). The report captured data from a variety of sources, including the World Bank. The researchers calculated a mean score in each category and combined the category scores for a final overall ranking of the 43 nations studied.
 

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