Which Countries’ Citizens Enjoy the Best Retirement? (Guess Where the U.S. Ranks?)

Which Countries’ Citizens Enjoy the Best Retirement? (Guess Where the U.S. Ranks?)

So, which country’s citizens enjoy the best retirement?

According to the latest 2021 Global Retirement Index Report from Natixis Investment Managers, the citizens from these 10 nations rank highest:

  1. Iceland
  2. Switzerland
  3. Norway
  4. Ireland
  5. Netherlands
  6. New Zealand
  7. Australia
  8. Germany
  9. Denmark
  10. Canada

And the U.S.? The United States moved back down one spot, now ranking as the 17th best place to be retired. (The country was 16th in 2020 and 18th in 2019.)

People Around the World 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.

And, the worries are not limited to those without savings. Wealthier households are concerned too. The report states, “In fact, 40% of investors say ‘it will take a miracle’ to retire securely.” It continues, “…42% worry retirement won’t even be an option. When it comes down to it, 45% are so concerned about retirement they avoid thinking about it altogether.”

The worries are expressed despite robust savings and investment returns well above inflation. Researchers believe that the pessimism may be a result of the pandemic mindset, but there are real economic factors.

4 Key Issues Threatening Retirement Security

Natixis cites 4 key concerns in 2021 that do warrant anxiety:

1. Inflation

It has been more than 10 years since the world saw inflation. The cost of living has been remarkably steady in the recent past. However, in June, U.S. inflation increased by .9% – a 5.4% jump over the previous year. It is at its highest level since 2008.

Some believe the inflationary trend is a temporary blip due to pent up demand for goods and services and supply chain issues. Others think it is a longer term trend. In fact, 72% of people surveyed globally say that inflation is a threat to their retirement.

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.

For example, Natixis writes, “Average inflation of 1.5% over two decades would result in a 34.7% increase in costs. In simplest terms, for every dollar spent in 2020, retirees will need $1.35 in 2040 to maintain purchasing power.”

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 NewRetirement Planner, a 360 degree retirement planning platform. Gain total control over your money and make better decisions about your future.

2. Low interest rates

Low rates have perhaps been good for borrowing which may be a driver of record high stock prices. How low is low? In 2020 16 countries had a negative 5-year average for real interest rates.

However, the persistently low rates have been problematic for many retirees who want more predictable income and growth than the volatile stock market can provide. (See low risk high-return investments.)

Pensions are especially at risk since their portfolio managers may pursue riskier assets to ensure they can meet future payments promised to the pension holders. (If you have a pension, don’t forget to talk with your administrator about the future viability of your payments.)

And, it is important to note that federal pensions like Social Security are impacted negatively by low rates which are 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:

Interest rates have nudged higher which is good news for some and a big concern for others.

It is worth keeping an eye on interest rates and consider your investment strategy carefully.

How do you want to balance the risks and rewards of being invested in the stock markets vs. the low returns that fixed-income investments currently offer. (A bucket strategy can be a good solution.)

And, if interest rates rise, will housing prices fall? Will a lower house value impact your retirement security?

3. Public debt

Natixis writes, “Massive stimulus spending was a critical policy tool that helped keep the public health crisis from becoming a global economic crisis. But record spending in 2020 and 2021 is the topper on debt pressures that have been building for decades. Investors are worried about what it means for their public retirement benefits.

The high levels of debt will likely keep interest rates low. And, public spending may increase – tightening the squeeze on retirement benefits.

What to think about:

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 NewRetirement Planner can help you.

Government policy makers face tough choices about programs like Social Security and Medicare. Will they raise taxes, raise the qualified retirement age, or cut benefits?

4. General worries about the future unknowns

The world feels perhaps more chaotic than ever. Whether the perception is reality or a figment of our pandemic imagination won’t be known for some time.

What is true is just how worried people around the world are about their retirement. And, doubts are highest among younger investors. Almost half of all millennials worry that they will work for their entire life – never retiring.

The high costs of healthcare and long term care, income inequality, and job insecurity contribute to general malaise about retirement prospects for all ages.

What to think about:

The NewRetirement 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:

  • Estimate your healthcare costs.
  • Try out different ways of covering a long term care need.
  • See what happens if you are forced into an early retirement. Try scenarios with passive income or a part-time job.

How Are the Rankings Compiled? Where Are the Best Places to Be Retired in 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 government indebtedness, the U.S. is holding at number 11th on this measure behind Singapore, Switzerland, New Zealand, Australia, South Korea, Chile, Estonia, Ireland, Iceland, 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 does not even score in the top 25 in this category (coming in at 26th) largely because of income inequality.

The top 10 countries for material well being in retirement include: Iceland, Norway, Netherlands, Czech Republic, Germany, Slovenia, Malta, Denmark, Austria, and Ireland.

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. The country’s rank fell from last year due to lower scores in both the happiness and environmental factors indicators. The top 10 are: Finland, Norway, Denmark, Switzerland, Sweden, Iceland, United Kingdom, Austria, New Zealand, and Germany.

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 falls one spot to 17th in the health category. The dip is surely related to the dip in life expectancy due to Covid-19 deaths. Life expectancy decreased one full year in 2020.

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.

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. 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.

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. 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.”

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. Netherlands

Without European residency, retirement in the Netherlands may be challenging.

Besides, with a cost of living that is higher than the United States it may not be the best place to retire. Although, rents are lower and health insurance is affordable.

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 NewRetirement 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:

NewRetirement Planner

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