Investor sentiment

2021 Global Retirement Index

September 12, 2021 - 3 min read

Executive Director, Natixis Center for Investor Insight – Natixis Investment Managers – US Distribution

It'll take a miracle: The search for retirement security in an insecure world

In 2021, the world is full of uncertainties for retirees and those saving for retirement. Security is a critical issue — from the immediate challenges of more waves of the pandemic, to longer-term questions about the environment, geopolitics, and inflation.

Retirement is clearly among the top issues for investors. In fact, 40% of investors say “it will take a miracle” to retire securely.¹ The 2021 Natixis Global Retirement Index looks at the state of retirement security around the world — and takes a deep dive into four critical concerns for retirement savers, including inflation, interest rates, public debt, and a world of worries.

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2021 Global Retirement Index Full Report

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How individuals feel about retirement security

According to our survey, the younger investors are, the younger they think they’ll retire.

Global

Generation Y

Generation X

Baby Boomers

With an average lifespan of nearly 79 years,* investors believe they’ll live 22+ years in retirement. Since this is just the average, many people will, in fact, live longer.

Global

Generation Y

Generation X

Baby Boomers

Many individuals say they may need to work longer than planned, but circumstances may prevent them from being able to.

Global

60%

Generation Y

66%

Generation X

61%

Baby Boomers

51%

40% of individuals say it’ll take a miracle for them to be able to retire securely.

Global

40%

Generation Y

46%

Generation X

41%

Baby Boomers

33%

* UN DESA & Gapminder. (August 31, 2019). Life expectancy (from birth) in the United States, from 1860 to 2020 [Graph]. In Statista. Retrieved September 02, 2021, from https://www.statista.com/statistics/1040079/life-expectancy-united-states-all-time/

Source: Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research, March-April 2021. Survey included 8,550 investors in 24 countries.

4 key concerns for global retirement security

Economic recovery has brought the first real inflation in 13 years. Economists may see it as transitory, but investors have been reminded that the past decade could look more like the exception than the rule.

The concern about inflation has been front and center in the recovery, as growth runs into supply chain disruptions, shortages, and consumers coming back to the mall with cash in hand. Investors should understand just how even a small increase in inflation can affect their purchasing power over time.

How does inflation erode purchasing power?

Even 2% inflation can add up. See how the sticker price of this car would increase over the years.

Car inflation graphic - 2020: $38,960; 2030: $47,492; 2040: $57,893; 2050: $70,571

*National Automobile Dealers Association. “New Vehicle Average Selling Price in The United States from 2016 to 2020 (in 1,000 U.S. Dollars).” Statista Inc., 11 May 2021, https://www.statista.com/statistics/274927/new-vehicle-average-selling-price-in-the-united-states/

Interest rates have been low since 2009. But they went even lower during the pandemic as policy makers moved to shore up local economies. Low rates may have been good for growth and good for consumers, but the environment has made it difficult for retirees who need to generate income.

Interest rates were low. And moved lower.

OECD (2021), Long-term interest rates (indicator). doi: 10.1787/662d712c-en (Accessed on 02 August 2021)

It’s important for investors to understand how low rates can impact their retirement income, leaving them open to market drawdown and sequence of return risk.

How do low rates affect retirement income?

As investors near retirement, they generally have more conservative portfolios, which often hold more bonds than stocks. When interest rates are low, the bonds will generate less income. As a result, investors often turn to riskier assets, like stocks, to make up the difference. But stocks give them greater risk exposure — including market drawdown and sequence of return risk.

When you earn your returns matters

With sequence of returns risk, it's not simply about gains and losses as the market moves. Timing is critical. When those gains and losses happen can have a big impact on your ability to preserve capital. For example, if you take a loss early on, it's harder to make up the difference. And if you generate returns early on, you're starting out ahead. Here's one example of what that could look like over 3 years for a portfolio of $450,000 (the median portfolio value for those surveyed).

*Withdrawals occur at end of each year

Graphic - Lightbulb Callout - Both these scenarios result in an average 8.9% annual rate of return after 3 years. However, the sequence of returns makes a big difference in how much money you’ve actually earned. In this example, when you start out with a gain, you end up with $374,450 after 3 years. But when you start out with a loss, you wind up with $357,650 – a difference of $16,800.

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.

Top 25 countries with the most public debt

OECD (2021), General government debt (indicator). doi: 10.1787/a0528cc2-en (Accessed on 02 August 2021)

High levels of public debt leads to tough choices for policy makers: increasing taxes, raising the retirement age, and cutting benefit payments.

Beyond the economic pressures, individuals share a broad range of worries about retirement. From employment to health to income inequality, they have a lot on their minds.

Many times retirement is not a choice. Unforeseen events like a late career layoff, health problems, or family care needs can take people out of the workforce and disrupt their retirement plans.

Healthcare is a particular concern. Seven in ten say they are worried that the costs of healthcare and long-term care will severely impact their financial security in retirement.

Income inequality is another issue on their minds, because if you earn less while working, you’ll have less to save — and less to draw from in retirement. The good news is that the dialogue around it seems to be getting through to the public.

Beyond finances, what are individuals worried about around retirement security?

7 out of 10 worry healthcare and long-term care costs will severely impact financial security in retirement. 71% of investors believe income inequality has a detrimental effect on retirement security. Nearly half of individuals worry they won't stay employed as long as they like.

Source: Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research, March-April 2021. Survey included 8,550 investors in 24 countries.

What's needed to achieve retirement security?

The risks presented by inflation, interest rates, and public debt, and the financial challenges of employment and healthcare are great. And they come at a time when many retirement systems are shifting from traditional pensions to defined contribution solutions.

As a result, eight in ten individuals know it is increasingly their responsibility to fund retirement. So, how can retirement investors tackle their goal of a more secure retirement? Individuals surveyed say their employer is a first line of defense in the process:

80% of individuals (including 77% of business owners in our survey) believe companies should be responsible for helping them achieve a secure retirement.
80% of individuals say they would be more inclined to work for a company that offered matching contributions to their retirement savings plan.
Seven in ten say having access to investments that reflect their personal values would motivate them to save more for retirement.
62% of individuals surveyed globally say they need professional advice selecting investments in their retirement plan. (And this is a group where more than half rate their investment knowledge as strong, and 62% say they understand the investments available in their retirement plan.)

In the end, society is shifting the responsibility for a more secure retirement to individuals. More than three-quarters (78%) of individuals say that the responsibility of funding for retirement is falling squarely on their shoulders. It’s important to help them make smart decisions to fulfill that responsibility. So, maybe it won’t take a miracle, but for many, it will definitely take a commitment from individuals, employers, and policy makers to achieve retirement security.

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Global retirement security is a worthy goal. If stakeholders live up to their roles and responsibilities, it can be within reach. To get the full details on where your country ranks — and learn more about the key concerns around global retirement security — download our full report.

2021 Global Retirement Index Full Report

8.23 MB

About the 2021 Natixis Global Retirement Index

The Global Retirement Index (GRI) is a multi-dimensional index developed by Natixis Investment Managers and CoreData Research to examine the factors driving retirement security and to provide a comparison tool for best practices in retirement policy. The index includes International Monetary Fund (IMF) advanced economies, members of the Organization for Economic Cooperation and Development (OECD) and the BRIC countries (Brazil, Russia, India and China). The researchers calculated a mean score in each category and combined the category scores for a final overall ranking of the 44 nations studied.

¹ Source: Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research, March-April 2021. Survey included 8,550 investors in 24 countries.

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed are as of September 2021 and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

All investing involves risk, including the risk of loss. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Natixis Distribution, LLC is a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliates of Natixis Investment Managers.

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