Retirement Security: How the US Stacks Up Against Other Countries

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Recent data from Natixis Investment Managers revealed that nearly half of Americans — 47% — say that achieving retirement security will be a miracle.

While an alarming statistic on its own, the fact that this number has jumped up considerably from the 40% reported just two years ago shows just how devastating rising inflation and interest rates have been on Americans’ retirement confidence.

However, one encouraging bit of information also came from the study. Overall, the score for retirement security in the United States actually jumped from 69% to 71% in 2023’s survey.

What are the inferences that can be made from this study, and how does the United States compare with other nations in terms of retirement security? Read on to learn more.

What Are the Notable Results From the Study?

Americans have a dimmer view of their retirement security no doubt due to rising costs, thanks to high inflation and interest rates. But importantly, the study found that retirement security in reality is increasing in America.

According to the study, this is due to a range of economic factors that are actually improving the financial lives of Americans. For example, wages have risen since the pandemic, unemployment is low, and tax rates still remain relatively low on a historic basis.

For retirees, higher interest rates may also spell higher income, although this can be a double-edged sword, as they often translate to higher costs as well.

How Does Inflation Affect Retirement Security?

Inflation affects retirement security in two primary ways. First, it increases costs for retirees. As many retirees live on a fixed income, they aren’t equipped to handle rising expenses unless they make cuts in other areas.

Inflation also diminishes the future value of current assets. In plain English, this means that the same amount of money in the future is worth less than it is today. This is particularly damaging to the value of bonds. If you buy a $10,000 bond today that matures in 10 years, for example, the $10,000 you receive back when the bond matures will be worth less than it is today. This is important for retirees, as many of them own bonds as income-generating investments. 

Which Countries Have the Highest Level of Retirement Security

The Natixis study also compared the level of retirement security in the United States with that in other countries. Perhaps not surprisingly, America did not fare all that well on a comparative basis.

Even though the U.S. improved its score for retirement security from 69% to 71%, it still fell two places in this year’s global ranking of developed countries, to No. 20. The primary reasons for this were the aforementioned high inflation rates and rising government debt. Life expectancy in the United States has also fallen since the COVID pandemic.

On a global basis, the top five countries for retirement security, according to the study, are Norway, Switzerland, Iceland, Ireland and Luxembourg. For the most part, these countries have strong social programs in place that help take care of residents both during their working careers and in their retirement, offering benefits like free education, free healthcare and guaranteed retirement pensions. 

How Can You Defend Your Nest Egg Against Rising Inflation?

One of the biggest defenses against rising inflation is the built-in cost-of-living adjustment provided by Social Security. Every year, your Social Security check will rise in value in line with the rate of inflation, as determined by the Social Security Administration.

While the increase in the value of your payments may not always match the rise in your personal expenses, sometimes it may actually be larger. Either way, it’s a helpful, built-in defense against rising inflation.

Beyond that, you might have to make some hard choices if you want to make your money last in an inflationary environment. For example, you might have to work a few extra years and retire at 67 instead of 65, or you might have to trim your lifestyle a bit.

Another option is to move to a more affordable area. If you’re planning to retire in California and find it to be a bit expensive, you might consider moving to the South or Midwest, where costs may be a bit more affordable. 

These suggestions are in line with the responses of survey respondents. The most common sacrifice that survey respondents indicated they would have to make was living frugally, with 42% noting that was a possibility. Thirty-one percent said they expect to either move somewhere less expensive or continue working in retirement, while a sizable percentage — 28% and 26% of respondents, respectively — said they might have to rely on family or friends or sell their homes.  

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