What is the best country to retire? Not the US, says research

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If you’re looking for the best place to retire, you might want to break the atlas: The United States has plunged even further down a new ranking.

Four decades of high inflation, a volatile stock market and rising government debt are among the factors threatening the economic security of retirees, according to the 2022 Natixis Investment Managers Global Retirement Index. The index evaluates 18 metrics, grouped into four categories: health, finances in retirement, quality of life and material well-being.

What’s the best place to retire?

Norway climbed from number 3 to first in the analysis of 44 developed economies, although the Scandinavian country is no stranger to the top of this list: when the index was first published in 2012, Norway was also at the top. Switzerland retained second place from 2021 and Iceland rounded out the top three.

The US was number 18, one place down from last year. The score was dragged down by low material welfare and finance statistics. The low ranking of material well-being was the result of low unemployment and income equality scores. The low rating in the Finance category was attributed to underperformance for tax, governance, bank loan portfolios and dependency on the elderly.

To some extent, a large country like the US would almost inevitably struggle to meet the targets set out in the index, said Dave Goodsell, executive director of the Natixis Center for Investor Insight. “The countries that do well on this list tend to be smaller,” he says. “It’s hard to get consistency” in a country with a large, diverse population.

The large population of Americans who are retiring or nearing retirement face challenges in employment, income inequality, government debt and tax policy. Natixis calls these the “levers that can boost or reduce the well-being of retirees.

“In a year that is on track to retire one of the worst ever, market decline and the surge in food, gas, housing and medicine has hit retirees particularly hard,” the company says.

Top 3 Challenges You Will Face When Retiring

Natixis highlighted three major risk categories for retiree finances. As anyone who has been running errands or filling their gas tank lately knows, inflation tops the list.

This year, the ripple economic effects of a global pandemic and geopolitical conflicts are fully visible: Russia’s war with Ukraine triggered an energy shock that could drive Europe into recession and contribute to global food inflation, while businesses of all kinds still struggle. dealing with supply chain problems and shortages of raw materials, components such as semiconductors and finished products.

While higher prices purchasing power of accumulated wealthNatixis says the other big challenges are a shift in the interest rate environment and longer lifespans. After a decade of absolute returns for savers, the cost of borrowing has started to rise, but returns on safe products commonly used by retirees remain meager and increase at a rate. a much slower pace. And these dynamics are set in an era of rising life expectancy that puts pressure on budgets — both the finances of individual households and governments responsible for overseeing public utilities figuring out how to pay for those programs.

“The people in the US are concerned with government debt. About eight in ten think this will lead to lower pension benefits in the long run. There are only so many ways this can be managed,” says Goodsell. And all of them, from higher taxes to cuts to government services, involve some degree of sacrifice.

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Healthcare costs skyrocket after retirement

Healthcare costs which are the world’s tallest represent another major concern for older Americans. “For us in the US, that comes to the top of the equation, and it’s not just healthcare — it’s long-term care too,” Goodsell says. “It’s the great unknown.”

Investors and savers are stuck between a rock in the surf, Goodsell says. A survey of financial planners conducted by Natixis underlined how much effort it takes people to strike the right balance: while 42% of respondents said that people planning to retire were overly optimistic and overestimate their investment income, an almost equal number — 41% — said a big mistake was that people were too conservative with their investments.

In the long run, investing in equities provides a hedge against inflation, but This year’s swooning stock market also stresses the risk inherent in that approach. “We have a volatility that we haven’t seen in a very long time,” Goodsell says, adding that this creates a particularly fraught scenario for the people who have to pull out of retirement accounts for income or to meet IRS requirements.