So, which country’s citizens enjoy the best retirement?
According to the latest 2023 Global Retirement Index Report from Natixis Investment Managers, the citizens from these 10 nations rank highest:
- Norway
- Switzerland
- Iceland
- Ireland
- Luxembourg
- Netherlands
- Australia
- New Zealand
- Germany
- Denmark
All of the countries from 2022 repeated in the top 10 except for the Czech Republic who was relegated to number 18, replaced by Germany who rose to number 9.
And the U.S.? The United States currently ranks as the 20th best place to be retired. (A slip of two points from 2022. )
Even as Economies Around the World Improve, People Are Worried About Retirement
While many investors are optimistic that the markets have done well after the huge test of a worldwide pandemic, retirement security remains a long-term worldwide challenge.
If you are worried about your own retirement, know that you are not alone. It seems that the entire world population shares your woe with the lingering impacts of inflation being at the top of the list of concerns.
And, the worries are not limited to lower income levels. Wealthier households are concerned too. The report states, “Saving was already a challenge. And now, as they ponder the prospects of higher prices, longer lives and the potential for reduced retirement benefits, many individuals doubt whether they will be able to put the pieces together at all. Overall, 48% of this group of affluent investors ($100,000+ in investable assets) worry that retirement won’t even be an option, including 38% of those with $1 million or more in assets.”
5 Key Issues Threatening Retirement Security
Natixis cites 5 key concerns in 2023 that do warrant anxiety:
1. Inflation
Over the last year, we have all gotten a hands on lesson on the immediate impacts of inflation. And, this experience has made inflation the number one investment concern for both retirees and those not yet retired. Seventy three percent of retirees and 60% of those not yet retired rank inflation as their biggest financial fear followed by: a large unexpected expense, taxes, healthcare costs, job security, and cash flow.
What to think about:Inflation is a significant risk to retirement security. If the cost of goods and services rises, you will need more savings to fund the difference.
It can be a good idea to stress test your retirement finances by running scenarios at different rates of inflation. This is possible using the Boldin Retirement Planner, a 360 degree retirement planning platform. Gain total control over your money and make better decisions about your future.
2. Rising interest rates
Like with low inflation, we had all gotten used to low interest rates. Over the past two decades low rates created favorable conditions for borrowers, businesses, and investors. However, the low rates made it hard for retirees who were seeking predictable income and growth from relatively safe investment vehicles like bonds. (See low risk high-return investments.) The low rates also changed how the money in pensions was managed.
With rates on the rise, there are serious implications for both individual investors and pension administrators.
Individual Investors: Rising rates brings good news and bad to individual investors. The bad is that borrowing now costs more. And, higher borrowing costs can lower the value of owned assets like homes. The good (especially for retirees) is that rising rates mean that it is easier to generate income off of savings. However, there is strong evidence that very few people understand this correlation:
- In a simple quiz, Natixis asked individual investors about bonds. Only 2% of investors passed with only 52% even attempting an answer and 48% simply replying, “I don’t know.”
- The lack of knowledge many be why only 22% of investors report adding bonds to their portfolio as rates have risen.
Pensions: In the long run, higher rates will help pensions address shortfalls in their funding ratios meaning that pensions should become more solvent.
And, it is important to note that federal pensions like Social Security are impacted negatively by low rates which has been a contributing factor to the system being slated to run out of money within the next 7–15 years. (Learn more about when Social Security might run out.)
What to think about with regards to higher rates:
- Watch borrowing costs.
- Learn about bonds. Keep an eye on interest rates and consider your investment strategy carefully.
- Consider how you want to balance the risks and rewards of being invested in the stock markets vs. the rising returns that fixed-income investments currently offer. (A bucket strategy can be a good solution.)
- If you have a pension, it is always a good idea to ask your administrator about the risks to your future payments.
- Evaluate the role of home equity in your retirement plan and perhaps scale back your long term rate of appreciation.
3. Public debt
Over the past 20 years, public debt has risen across the world. The good news? The unique combination of higher prices, higher wages, and economic growth boosted projections for the tax revenues needed to make good on debt obligations. As a result, many countries saw their debt to GDP ratio decline significantly in 2022. In the US, public debt declined from 159.9% of GDP to 144%.
The bad news? We still have a lot of debt. And, 77% of of individual investors who are still working and 73% of retirees worry that high levels of public debt will result in reduced benefits down the road.
What to think about:
Many people worry that public debt will mean reduced Social Security and Medicare in the future. Regardless of what will happen, it is more important than ever to create and maintain your own comprehensive retirement plan – paying close attention to your own longevity and to your retirement income sources. The Boldin Retirement Planner can help you.
4. Demographics
Because of increases in life expectancies and a reduction in the birth rate, developed countries now have more people who are older and no longer working.
This translates to a crisis for public benefits which are built on a simple premise: you need more people paying into the system than there are people taking benefits out.
What to think about:
Understand your own life expectancy and how that impacts your retirement savings needs.
Consider the need for a young enough population of workers who 1) pay into the system and 2) provide needed products and services.
5. Unrealistic expectations and understanding of risks
Natixis reports that individual investors underestimate what is needed for a secure retirement. Most people do not understand how long retirement will last or how much money will be required to fund retirement.
They also have unrealistic expectations about investment returns. And, according to Natixis, “The gap between what’s expected and what’s realistic is greatest in the US, where it is 123%. Investors say they expect 15.6%, but advisors call 7% realistic.”
What to think about:
The Boldin Retirement Planner can help you plan for future unknowns and gain confidence that you can create a plan for financial security no matter what happens. For example, the system will help you:
- Run scenarios with different:
- Rates of return on investments
- Longevity ages
- Retirement dates
- Inflation values
- Discover how much you need in savings for a secure retirement (under different conditions)
- Explore other risks:
- How to cover a long term care need
- The implications of guaranteed income vs. relying on stock returns
How Are the Natixis Rankings Compiled? And, Where Does the United States Rank for Each Category?
The Natixis survey creates an overall retirement security score that is based on 18 different performance indicators that are grouped into the following 4 categories:
Will they be able to generate the income they need to sustain themselves through retirement? Can they be confident the financial systems supporting their retirement funding will be resilient through short-term disruptions? Do they have access to the healthcare needed to address the physical challenges of aging? What will their quality of life be like during this vulnerable point of life?
1. Finances in retirement
This category addresses old-age dependency, bank non performing loans, inflation, interest rates, tax pressure, governance, and government indebtedness.
These are the big external financial pressures that can impact an individual’s finances. The study says that:”Finances in Retirement is a particularly important index, as it reflects the strength of a country’s financial system and the ability of the government to provide for its citizens in retirement.”
How does the United States rank? Due to inflation and government indebtedness, the U.S. is holding at number 13th on this measure. However, non-performing loans, interest rate, and tax pressure scores improved over the past year.
The top 10 include:Switzerland, South Korea, Australia, Singapore, Luxembourg, Ireland, Chile, New Zealand, Norway, and Canada.
2. Material well being
This category measures how well retirees can support themselves in retirement and looks at income equality, income per capita, and unemployment.
How does the United States rank? The United States has improved to rank 21rst in this category. In previous years it did not even score in the top 25 largely because of income inequality. However, according to the report, by the end of 2022, the United States’ unemployment rate reached its lowest level in over 50 years, matching the unemployment rate from just before the pandemic. Income inequality in the US has also stabilized in the last decade, in part due to the rapid growth in wages for low-paying jobs amid the post-COVID revival of the
service industry.
The top 10 countries for material well being in retirement include: Norway, Slovenia, Iceland, Czech Republic, Netherlands, Switzerland, Ireland, Germany, Malta, and Luxembourg.
3. Quality of life
These are the factors that the study uses to determine quality of life for retirees: happiness, air quality, water and sanitation, biodiversity and habitat, and environmental factors.
How does the United States rank? On these measures, the United States ranks 21st. Most environmental indicators saw slight increases (air quality, water and sanitation, environmental factors) with the exception of biodiversity and habitat, which saw a slight dip (from 66% to 61%). The happiness score also slightly decreased (from 84% to 81%).
The top 10 are: Finland, Denmark, Sweden, Norway, Iceland, Switzerland, Austria, New Zealand, Netherlands, and Luxembourg.
4. Health
The health scores reflect physical wellness and the associated medical costs. This score is specifically based on life expectancy, health expenditure per capita, and non insured health expenditure.
The study notes that “The higher a country’s health expenditure per person, the higher its life expectancy is expected to be.”
How does the United States rank? The United States ranks 25th in the health category. The US exhibits a low score as life expectancy took a hit from the COVID-19 pandemic and an increase in drug-related and
accident deaths.
Generally, the United States does not score particularly well in this category because our life expectancy does not move in line with how much we spend on healthcare per person. The U.S. finishes first for the health expenditure per capita (we spend the most on healthcare) but only 30th for life expectancy.
The top 10 are: Norway, Japan, Luxembourg, Iceland, Switzerland, Sweden, Ireland, France, Australia, and Netherlands.
Can a U.S. Citizen Retire to One of the Top 5 Countries?
Here is the run down of what it takes to retire to one of the top 5 best places to be retired.
Warning: These are not necessarily the easiest places to retire to from the United States — perhaps it is best if you were born there. (Go check out the best places to retire in the world if you are an American looking to retire abroad.)
1. Norway
Retiring to Norway, if it were possible, would be a huge shock — the long winter and endless darkness might make you rethink the plan. In fact, many Norwegians actually spend their retirement in Spain or Portugal where the cost of living is lower (and the elements are more forgiving).
According to LifeinNorway.net, “Unlike some European countries, there is no specific retirement permit available. To live in Norway without working, you must either already have permanent residence, or have enough money to sustain yourself.”
2. Switzerland
Mike Coady, a financial and expatriate expert, lists 10 reasons why Switzerland makes an ideal retirement destination.
Unfortunately, affordability is not one of those reasons.
3. Iceland
Retiring to Iceland would be a wintry, expensive, and difficult proposition for a U.S. citizen. It is one of the most expensive countries in the world.
EEA/EFTA citizens have a relatively easy time, but Americans will face a lot of bureaucracy and, as part of the application process, you have to prove that you can support yourself while in Iceland. As of 2019, if you don’t have an employment contract, you must have at least 189.875 ISK (about $1500) per month in your bank account. Learn more about how to move to Iceland.
4. Ireland
Ireland holds a special place in the heart of many Americans. And, with rolling green hills, a temperate climate, tremendous natural beauty, and friendly, outgoing people, it could be a retirement delight.
First the good news: U.S. citizens can become an Irish citizen if you, your parents, or grandparents were born there.
The bad news? Everyone else must be able to prove that they won’t be a burden to the state and prove at least $55,000 in annual income. You won’t be allowed to work, must renew your permission every year and other recently updated rules actually make it quite difficult for a U.S. citizen to retire to Ireland.
5. Luxembourg
Retiring to Luxembourg is possible. Expatriates who have worked in Luxembourg and contributed to the old-age pension fund for at least 10 years are eligible to claim a pension. There is also a system for transferring an international pension.
The countries offers an excellent quality of life, but at a high cost of living.
Can You Make Your Own Home Be One of the Best Places to Be Retired?
There is no place like home… and that can be true for retirement despite what this study might say.
The trick – no matter where you live – is to have adequate savings and financial resources. And, if you haven’t saved enough, then be willing to make trade offs like working longer, downsizing, cutting expenses, and getting creative in order to achieve financial security.
The Boldin retirement planner is the ideal tool for figuring out how to make retirement work for you (at home or abroad). This detailed system gives you almost complete control over all the factors that can contribute to your financial well being.
Start by entering basic information and get some initial feedback on where you stand. Then, add more detail and more accurately estimate for how much you need. Best of all, you can try an infinite number of scenarios and find a way to be retired on your own terms.
If you are interested in moving to one of the best places to be retired or elsewhere, you could try putting in the costs for retiring to your desired destination and compare that to retiring at home. For more ideas for where to retire, explore: