Low Interest Rates Are Worsening Retirement Prospects Worldwide

It’s one nasty brew: a long spell of low or negative interest rates, a record level of public debt, a recession, income inequality and climate change.

Those are some of the elements affecting the welfare of retirees around the world, and they make the odds of a financially secure retirement ever more remote, according to the 2020 Natixis Global Retirement Index released on Tuesday.

The annual report, which ranks 44 countries on retiree wellbeing and financial security, shows Iceland, Switzerland and Norway at the top. The U.S., at No. 16 among the developed nations studied, moved up two spots on improved measures for quality of life and material wellbeing — but that was based on 2019 data, so it does not include the pandemic-induced spike in unemployment this year.

A second wave of Covid-19 cases could send unemployment rates even higher in the year’s fourth quarter, the report said.

One of the biggest threats to retiree wellbeing is low-to-negative interest rates, which can make earning a decent income from safe investments nearly impossible. The report found that for 16 of the 44 countries studied, the five-year average for real (inflation-adjusted) interest rates had gone negative. In the 2016 version of the report, just one country, the U.K., fit that bill.

The report also shows the U.S. is seventh from last on income inequality — while it ranks at No. 6 for income per capita. In a similar disconnect, the U.S. has the highest score for health expenditures per capita, yet fell out of the top 10 — to No. 16 — among developed countries in the healthcare category due to a lower life-expectancy ranking.

“Demographics put retirement security on shaky ground a long time ago,” said Dave Goodsell, executive director of the Natixis Center for Investor Insight, in an emailed statement. “But now fundamental problems posed by an aging population have been compounded.”

— With assistance by Emily Cadman

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