The Pulse

United States Drops To 18th For Retirement Security In Natixis Investment Managers’ 10th Annual Global Retirement Index

Financial advisors identify the Top Ten retirement planning mistakes investors make. The two biggest are: underestimating length of life and the impact of inflation on savings

Natixis Investment Managers 2022 Global Retirement Index shows the US moves down one place in the ranking, with lower scores for employment, income equality, government debt, tax pressure, and surge in America’s aging population. To view and download a full copy of the report, visit here.

BOSTON–(BUSINESS WIRE)–The United States slipped one spot to No. 18 out of 44 developed countries in the Natixis Investment Managers 2022 Global Retirement Index (GRI). The annual index, which marks its 10th anniversary this year, shows erosion in key factors affecting the financial security and material wellbeing of US retirees. In a year on track to be one of the worst on record to retire, the market downturn and sharp increase in food, gas, housing, and medications have hit retirees particularly hard. New market risks, namely inflation, low but rising interest rates, and ongoing volatility, will make it harder for retirees to make up for lost ground and calls for new thinking about retirement planning by savers.

“Getting retirement security right so that people can live with dignity after their working years is a core sustainability issue for society and one of the most important mandates for governments and the financial industry,” said Liana Magner, Executive Vice President and Head of Retirement and Institutional in the US for Natixis Investment Managers, speaking today to a gathering of large US retirement plan sponsors at the annual Institutional Investor-Defined Contribution Institute in Half Moon Bay, California. “The GRI provides insight into the levers that can drive or diminish the wellbeing of retirees, and it serves as an important benchmarking tool for policymakers, employers, financial professionals and individuals.”

Natixis Investment Managers (Natixis IM) created the Global Retirement Index in collaboration with Core Data Research to establish a global benchmark that incorporates the wide variety of factors essential for people to enjoy a healthy and secure retirement including not only important financial factors but also access to and cost of healthcare, climate conditions, the state of governance and general happiness of the population. The GRI rankings are based on an aggregate of mean scores from 0% to 100% for 18 performance measures in each of four sub-indices — Finances in retirement, material wellbeing, health, and quality of life – which are combined to provide an overall picture of the environment for retirees.

For the four sub-indices, the US ranks as follows in the 2022 GRI:

  • 11th for Finances in Retirement
  • 17th for Health
  • 21st for Quality of Life
  • 30th for Material Wellbeing

The US dropped to No. 18 this year from No. 17 in the 2021 GRI, in part because of relative improvements in other countries that pulled them ahead in the index. The overall US score declined to 69% from 72% a year ago. This was driven by lower scores on key measures of material wellbeing, namely employment (which has since returned to pre-pandemic levels except among workers over the age of 651) and income equality (for which the US comes in with the seventh lowest score of all GRI countries). Lower scores on tax pressure, old-age dependency (the number of people age 65+ per 100 people between the working age of 15 to 64), and higher government debt also contributed to a lower overall ranking.

Over the past decade, the US score for government indebtedness has declined by 60 percentage points from 87% in 2012 to 27% in 2022, the sixth lowest score among all GRI countries.

Global rankings

  • After four years in the No. 3 spot, Norway reclaimed its No. 1 ranking in the 2022 GRI.
  • Iceland, which has held the top spot since 2018, fell to 3rd, while Switzerland held its strong position at No. 2.
  • The remainder of the Top Ten countries this year are Ireland (4th), Australia (5th), New Zealand (6th), Luxembourg (7th), Netherlands (8th), Denmark (9th), and the Czech Republic (10th).
  • Luxembourg and the Czech Republic entered the list of top ten countries for the first time this year, rising to No. 7 and No. 10, respectively. Germany and Canada, which were among the top ten countries last year, fell to No. 11 and No. 15, respectively, in this year’s GRI.
  • Ireland stands out as having the biggest gain in GRI ranking over the past ten years, rising to 4th from 38th in 2012. New Zealand, Iceland, and the Czech Republic also are among the biggest gainers.

Biggest Risks to Retirement Security: Inflation, Rates, Longevity

The responsibility for retirement security falls most heavily on individuals and their personal savings. Longevity is the all-important part of the equation that drives all other inputs including how much money is needed, investment return expectations, and spending rates. According to Natixis IM’s 2022 survey of US financial advisors, the biggest retirement planning mistakes investors make are:

1.) Underestimating how long they will live: 61%

2.) Underestimating the impact of inflation: 57%

3.) Being too conservative in investments: 54%

4.) Overestimating investment income: 52%

5.) Forgetting to factor in healthcare costs: 49%

Getting retirement security right so that people can live with dignity after their working years is a core sustainability issue for society and one of the most important mandates for governments and the financial industry...

“Retirement security challenges have come home to roost in 2022,” said Dave Goodsell, Executive Director of the Natixis IM Center for Investor Insight. “Inflation has been the long-sleeping giant of worries for retirees and is now at the apex of retirement security threats. The rate hikes the Federal Reserve and other central banks have implemented to quell inflation further compound the problem, creating short-term pain for retiree portfolios. Investment strategies, financial planning, employee benefits, and policy considerations will all need to factor in a new funding equation that accounts for inflation, interest rates, and increased longevity.”

The challenges to retirement security are particularly problematic in countries with a pay-as-you-go retirement system, which is the model for Social Security in the US. In 1950, just 15 years after the Social Security system was created, the US had an old age dependency ratio of just 14.2%, meaning that for every 100 working-age people, there were 14 dependent people. By 2020, it had reached 28.4%, and by 2050, the over-65 population in the US is projected to reach 40.4%. Increased longevity, which contributes to the growth of the aging US population, breaks the underlying formula on which the retirement system is based, and the nation’s growing debt burden serves to limit policy options.

Natixis IM’s report on the 2022 GRI and ten-year retrospective on movement in the index as individual countries have sought various strategies for addressing the retirement security challenges provides valuable insight for policymakers and all stakeholders.

 

 

 

Methodology
The Global Retirement Index assesses factors that drive retirement security across 44 countries where retirement is a pressing social and economic issue. It was compiled by Natixis Investment Managers with support from CoreData Research. The index includes International Monetary Fund (IMF) advanced economies; members of the Organization for Economic Cooperation and Development (OECD); and the BRIC countries (Brazil, Russia, India and China). The researchers calculated a mean score in each category and combined the category scores for a final overall ranking of the 44 nations studied.
About the Natixis Center for Investor Insight
The Natixis Center for Investor Insight is a global research initiative focused on the critical issues shaping today’s investment landscape. The Center examines sentiment and behavior, market outlooks and trends, and risk perceptions of institutional investors, financial professionals and individuals around the world. Our goal is to fuel a more substantive discussion of issues with a 360° view of markets and insightful analysis of investment trends.
About Natixis Investment Managers
Natixis Investment Managers’ multi-affiliate approach connects clients to the independent thinking and focused expertise of more than 20 active managers. Ranked among the world’s largest asset managers[1] with more than $1.1 trillion assets under management[2] (€1.1 trillion), Natixis Investment Managers delivers a diverse range of solutions across asset classes, styles, and vehicles, including innovative environmental, social, and governance (ESG) strategies and products dedicated to advancing sustainable finance. The firm partners with clients in order to understand their unique needs and provide insights and investment solutions tailored to their long-term goals.
Headquartered in Paris and Boston, Natixis Investment Managers is part of the Global Financial Services division of Groupe BPCE, the second-largest banking group in France through the Banque Populaire and Caisse d’Epargne retail networks. Natixis Investment Managers’ affiliated investment management firms include AEW; AlphaSimplex Group; DNCA Investments;[3] Dorval Asset Management; Flexstone Partners; Gateway Investment Advisers; Harris Associates; Investors Mutual Limited; Loomis, Sayles & Company; Mirova; MV Credit; Naxicap Partners; Ossiam; Ostrum Asset Management; Seeyond; Seventure Partners; Thematics Asset Management; Vauban Infrastructure Partners; Vaughan Nelson Investment Management; and WCM Investment Management. Additionally, investment solutions are offered through Natixis Investment Managers Solutions and Natixis Advisors, LLC. Not all offerings are available in all jurisdictions. For additional information, please visit Natixis Investment Managers’ website at im.natixis.com | LinkedIn: linkedin.com/company/natixis-investment-managers.
Natixis Investment Managers’ distribution and service groups include Natixis Distribution, LLC, a limited purpose broker-dealer and the distributor of various U.S. registered investment companies for which advisory services are provided by affiliated firms of Natixis Investment Managers, Natixis Investment Managers S.A. (Luxembourg), Natixis Investment Managers International (France), and their affiliated distribution and service entities in Europe and Asia.
[1*] https://www.kansascityfed.org/research/economic-bulletin/how-many-workers-are-truly-missing-from-the-labor-force/
[1] Cerulli Quantitative Update: Global Markets 2022 ranked Natixis Investment Managers as the 18th largest asset manager in the world based on assets under management as of December 31, 2021.
[2] Assets under management (“AUM”) of current affiliated entities measured as of June 30, 2022 are $1,156.7 billion (€1,106.7 billion). AUM, as reported, may include notional assets, assets serviced, gross assets, assets of minority-owned affiliated entities and other types of non-regulatory AUM managed or serviced by firms affiliated with Natixis Investment Managers.
[3] A brand of DNCA Finance.

 

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