Getting old in America isn't what it used to be.
In a worldwide study, the U.S. fell to No. 17 (down three spots from last year) in the Natixis Global Asset Management Global Retirement Index. The index ranks 43 mainly developed countries on their ability to offer its citizens a secure retirement. Norway, Switzerland, Iceland and Sweden top the list.
Why did the U.S. have such a dismal showing?
The U.S. took hits in income equality, health care spending and life expectancy. While America may have the fifth-highest income per capita, we have the sixth lowest score for income equality, suggesting that retirement saving is difficult for average workers. Our life expectancy fell, yet we spend the most on health care compared to the other countries analyzed in the index.
A big part of the problem is demographics. Overall, we are living longer — and that's not necessarily a good thing.
The global elder population is expected to more than triple to 2.1 billion by 2050, Natixis said, citing World Bank data, making retirement security "one of the most pressing social issues facing the world in the next 30 years."
About half of the people born today in the developed world are expected to live past the age of 100. This is up from a global average life expectancy of 71 currently, and just 34 several generations ago. That increase, noted in a report from benefits consultant Mercer has consequences for health care, careers, families, finances and retirement.
"The big problem is that we are living longer and retiring earlier," said Matt Fellowes, chief executive of United Income, a registered investment adviser that specializes in retirees. "In the last century we've added 30 years to the average human life...we are forecast to add another 30 years. That is a core of the crisis. At some point we'll extend our lives well past our ability to work."
And a large population of Americans is entering retirement right now (we're looking at you, baby boomers), and when it comes to retirement, it appears that we're really unprepared. The median retirement account balance is $2,500 for all working-age households and $14,500 for near-retirement households, according to the National institute on Retirement Security.
There are 10,000 people retiring each day, according to a study by Merrill Lynch and Age Wave, a consultancy studying the cultural and economic impacts of aging. More than 80% of Americans don't know how much they'll need to retire — and retirement is our most expensive life "purchase."
With the decline of the company pension, individuals have been forced to take on more responsibility for retirement savings and planning. That's a significant burden, the Mercer report points out, since no one knows exactly how much money they'll need or how long they'll live (they could underestimate by decades), people don't have the confidence or skill to make such consequential financial decisions, and many don't trust financial markets.
Still, Natixis found that Americans view forced savings positively — 80% of survey respondents thought it should be mandatory for employers to offer a plan, and 61% said that individual contributions should be mandatory as well.
About 70% of baby boomers (age 51 to 71) believe government benefits will be available to them when they retire. But aside from government funds, investors surveyed by Natixis said their retirement would be financed by personal savings (90%), personal investments (79%), and workplace savings (76%) before Social Security (70%). They also plan to rely on their spouse's or partner's savings (63%) and liquidation of personal assets such as a home or business (51%).
Quite a large number of people are hoping for help from outside sources, such as an inheritance (45%) or even hitting up their kids for money or a place to live (41%).
In fact, 60% of millennials surveyed by Natixis said they were counting on an inheritance and 51% said they expected support from their children. To which the study's authors grimly pointed out that the generation criticized for living too long with their parents as young adults may wind up retiring to their children's garages. Though unlike boomers, millennials still have decades to save aggressively and avoid that fate.