5 Risks to Retirement Security: For the first time in a decade, the Natixis Investment Managers’ Global Retirement Index (GRI) has brought some good news for retirees around the world, including the United States.

Improved economic conditions, marked by employment growth, wage gains, and interest rate stability, have contributed to an overall increase in retirement security scores. However, this macro-level optimism isn’t necessarily reflected in the everyday lives of retirees and working Americans. Natixis Investment Managers’ 2023 survey of individual investors has uncovered some critical challenges to retirement security.

Here are five key risks to retirement security identified in the report.

Inflation is killing retirement dreams: 62% of working Americans say that inflation has significantly hurt their ability to save for retirement, and it ranks as the No. 1 investment concern for 65% of respondents overall but especially among retirees (72%). Higher everyday expenses is also the biggest financial fear for workers (66%) and retirees (81%), many of whom are living on fixed incomes.

Public debt: In 2022, the U.S. public debt declined from 159.9% of GDP to 144% as the unique combination of higher prices, higher wages, and economic growth boosted projections for the tax revenues needed to make good on debt obligations, the report says. Yet, 77% of Americans surveyed by Natixis worry that high levels of public debt will result in reduced retirement benefits down the road. When asked about their greatest fears about retirement, the top answer (49%) was a cut in government benefits (such as Social Security), which 51% agree would make it difficult to make ends meet financially.

Rising interest rates: Higher interest rates should be good news for retirees, creating more favorable conditions to generate steady income from their retirement savings and enhancing the ability of bonds to provide a risk ballast in portfolio construction, the report says. Yet as interest rates have risen, only 22% of retirees and 45% of workers plan to add bonds to their portfolios this year, in part because only 3% of U.S. investors understand how rates affect bond prices and yields.

Demographics: An aging U.S. population and dropping fertility rate has increased old-age dependency on the younger, working population. This is exerting undue pressure on traditional notions of retirement, particularly as more people live longer. Eight in 10 surveyed, including 85% of retirees, agree that government programs don’t take into account the fact that people are living longer. Moreover, 64% agree that women are at a greater disadvantage because of their longer lifespan and role as caregivers.

Big expectations and bad assumptions: When it comes down to it, the only factors individuals can control are their expectations of life in retirement, savings goals, and investment returns. More than half (53%) of working Americans say they accept that they are going to have to keep working for longer than anticipated, but 38% are worried they won’t be able to stay employed as long as they’d like.

Retirees in the survey who had planned to quit working at age 65 actually retired earlier, on average, at age 61. More than one-third of retirees (35%) say their finances are tighter than they had expected.

Nearly all of the developed countries in the index received a higher overall score for 2023. Norway is ranked No.1 for retirement security in the index, followed by Switzerland, Iceland, and Ireland, all the same as in last year’s ranking. Among developed countries, only Portugal, Spain and Japan had decreases in their overall score.
— By Samanda Dorger