Opinion: When it comes to retirement security, we are… No. 17

Somehow shouting “We’re number 17!” Just doesn’t have the right ringtone.

But this is where the United States ranks – 17th – in terms of well-being of retirees. This is according to the 2021 Global Retirement Index published by Natixis Investment Managers. The index provides an overview of the relative financial security of retirees in 44 countries in four key areas:

  • Material well-being (having enough money). The United States ranks 11th.

  • Retirement finance (access to qualified financial advisers and services to help preserve the value of savings and maximize income). The United States ranks 17th.

  • Access to good health care. The United States ranks 21st.

  • Quality of life (a clean and safe environment in which to live). The United States ranks 26th.

Obviously, these things are related. Without the first element – having enough money – experienced financial advisers usually won’t even sit down with you, and insufficient assets obviously influence the type of health care you receive and whether you live in a place with poor health. crime rate, good schools, roads and everything. the rest.

Based on what respondents in the United States said, Natixis pasted a disturbing headline on the study’s webpage, saying “It’s gonna take a miracle” to “retire safely in a insecure world ”. This is what two in five respondents told them.

What’s interesting is that this gloom is less evident among older Americans, but much more prevalent among younger Americans. For example, 30% of baby boomers (born between 1946 and 1964 and currently retiring at the rate of 10,000 a day), are gloomy about their “well-being in retirement”. But 45% of Gen X (born 1965 to 1980) and 46% of Gen Y, better known as Millennials (born 1981 to 1996) are.

There is more gloom among young Americans for an important reason: They don’t think Social Security will be there for them, at least not in its current configuration. Three-quarters (77%) of all Americans polled fear that rising public debt will lead to cuts in Social Security benefits, making it harder for retirees to make ends meet.

Read: Worried about social security? 5 ways to save it

The fear is understandable. As we’ve mentioned many times before, an authority no less than Social Security administrators warned for years – and barely two weeks ago – that the system’s gargantuan trust fund is now burning more money. than he receives. by the year 2034, the Trust Fund will be gone.

What happens then? In 2034, baby boomers will be 70 to 88 years old and Generation X will be 54 to 69 years old. They will still benefit from Social Security, but based on directors’ projections, at just 78 cents on the dollar. Tens of millions of retirees today are heavily – if not totally – dependent on social security, and the prospect of a 22% cut is, frankly, frightening.

Fattening of the trust fund

And these reduced benefits, where will the money come from? Where it came from now: Payroll taxes that are paid by employers and employees (each currently pays 6.2% of a person’s salary into the Trust Fund).

The problem is, there aren’t enough young workers to meet the needs of all baby boomers and Gen Xers. The birth rate in the United States is at its lowest level in years. decades – American women just don’t have many babies – and there is an antipathy towards immigration, at least in some circles. Consider the fact that there are currently 10.9 million job openings in the United States, according to Department of Labor data. Every unfilled job robs the Trust Fund of much-needed income.

So unless you have a lot more workers, and quickly, the only way to support the system is pain: benefit cuts or tax increases. No wonder young workers are gloomy.

It is therefore hardly surprising that the Natixis study also says:

  • Nearly three in five workers think they will have to keep working longer to save enough for retirement

  • 36% think they will never have enough to retire, including 51% of Millennials, 48% of Generation X and 20% of Baby Boomers, again, a correlation between youth and gloom.

  • And whatever workers have saved, two-thirds (68%) fear that long-term inflation will erode their purchasing power (Box: The U.S. consumer price index rose 5.3% over the past year, according to data released Tuesday)

  • Almost two-thirds (64%) are worried about the surge in health spending.

  • Half (50%) fear that low interest rates will make it harder to generate income in retirement (although if inflation remains high, the Federal Reserve may be more likely to raise rates).

Meanwhile, a recent and giant problem has been added to retirement concerns: the pandemic, which has “exacerbated financial inequalities and accelerated long-term trends that are eroding the prospects of retirement security for many,” said said Jim Roach, senior vice president of Natixis. retirement strategies.

He is right. As a result of the pandemic, millions of people have been forced to retire earlier than expected, accelerating the drain on Social Security. The labor market has been and continues to be seriously disrupted. The American health care system, in places, is strained, even faltering, under the pressure of increased demand. It really could “take a miracle” to retire safely in an insecure world. “

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