Do Americans Have the Best Retirement?

Woman standing on front porch reading a letter with an American flag in the background.
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Everyone longs for a comfortable retirement. In some countries, this is more easily accomplished than in others. The Natixis Global Retirement Index (GRI) measures four key areas that contribute to a comfortable retirement. It then compares the policies of 44 countries and ranks them according to how well they are doing.

The United States ranks 16th in the 2020 GRI, which means we have plenty we can learn from the 13 countries where a comfortable retirement is more easily achieved. The top 10 countries were Iceland, Switzerland, Norway, Ireland, Netherlands, New Zealand, Australia, Canada, Denmark, and Germany.

Let’s dig into this study and look at the four key areas that were measured: finances in retirement, material well-being, health, and quality of life.

Finances in Retirement

In the finances arena, America ranked number 11. Not bad, but it could be better.

This component of the index looked at access to quality financial services and the ability to preserve savings. The research included factors such as inflation and real interest rates. Additional factors included government indebtedness, the number of non-performing bank loans, tax pressures, governance, and the old-age dependency ratio.

The top five countries in this category were Chile, Singapore, New Zealand, Switzerland, and Australia. The top-performing countries have a large number of people who participate in workplace savings plans and have developed policies that focus on increasing participation in these types of plans.

For example, Chile made major changes to their pension system in 1981, and then again in 2008, and now require minimum contributions to retirement savings of 10% of earnings. Switzerland and Australia also have mandatory workplace savings programs, with Switzerland’s plan, which launched in 1985, considered by many to be one of the best retirement systems in the world. In the United States, one-third of private industry workers do not have access to a workplace retirement plan.

If you are working, provide the GRI report to your human resources department and encourage them to see what steps they can take to increase participation in the company plan and provide access to quality advice. Consider sending it to your representative in Congress also.

Material Well-Being

In this category, America ranked 26th. The top five were Norway, Iceland, Germany, Netherlands, and Czech Republic.

This category considers income per person, unemployment, and income equality. The United States came in 38th in the income equality category. Overall, countries with high income per person and low-income inequality made it to the top 10. The U.S. has much work to do in this area. It should not be a surprise that this factor had a big role in the last election.

Health

The United States ranked 16th in the health category. The top five were Luxembourg, Ireland, Norway, France, and Japan.

The health component of the Global Retirement Index considers access to quality health care services and looks at data about health expenditures per person, health costs for the uninsured, and life expectancy.

When you peek under the hood at the underlying data, the U.S. spent the most per person on health care out of any country but came in 32nd in life expectancy. That means all that spending may not be as productive as it could be. As the spending increases, you should see a measurable result in terms of prolonged life expectancy. In addition, America has a high level of spending for those who are not insured.

America’s ranking is good in this category, but there is room for a lot of improvement in the quality of care that is received per dollar spent.

Quality of Life

Measuring happiness is a challenge, so this component of the Global Retirement Index includes self-reported levels of happiness from citizens. It also looks at quantifiable factors such as air quality, water, sanitation, climate change, energy, biodiversity, and habitat.

America ranked 16th in the quality of life category. Improvements in the climate category can help our ranking here. The top five countries were Denmark, Switzerland, Norway, Finland, and Sweden.

What Can We Learn From the Retirement Index

The countries that are in the top 10 in the GRI provide excellent examples of what types of changes can increase retirement security for an entire country. Government policy can make a positive difference. These changes include such things as:

  • Making sure workers have access to retirement plans. As traditional pension plans go away, it is critical to make sure workers have alternatives—and participate in them.
  • Providing incentives to save. If a large portion of citizens has no money in retirement, this becomes a burden on the country's entitlement budget. Providing long-term incentives to save is important.

Maximizing Your Retirement Success

Although the United States has some work to do to make it to the top 10, don’t wait for the government to ensure you have a comfortable retirement. One of the key components of retirement success is saving enough. In the U.S., many of those who do have access to a retirement plan such as a 401(k) plan are simply not maximizing their contributions. Most Americans are contributing less than 5% of their income toward retirement. You should work to get this to at least 10%.