One measure that hurt the U.S. in this year's index was its rank as No. 30 on life expectancy, even though it spends more per capita on health care than any other country in the index. The mismatch suggests U.S. health expenditures "may not be yielding the same return on investment" achieved by top-ranked countries for longevity, such as Japan, the survey diplomatically noted.
The U.S. was also dinged because income inequality rose from last year. America got the sixth-lowest score in the material well-being category for all 43 countries, even though it was No. 5 in per capita income. The report's analysis: "The results suggest that millions of lower-income Americans are missing out on that economic growth and may struggle to save for a secure retirement as a result." It shouldn't be too surprising, then, that the quality-of-life measure for retirees fell for the U.S., mainly due to a dip in a happiness indicator. On the bright side, cleaner air improved the American ranking on environmental factors, which are included in the quality-of-life sub-index score.
Challenges to retirement security in a world of aging populations and increasing longevity was a major theme of the report. The ranking looks at "old age dependency," the ratio of the population of younger workers, who will be paying into a retirement system like Social Security, to the retiree population drawing down that money. The bigger the pipeline of younger workers relative to older workers, the better the score.
"If we only had one of these factors—poor dependency ratios but people weren't living longer, or great dependency ratios so it would be OK that people were living longer—it wouldn't represent the type of risk it does to the entire retirement system," said Dave Lafferty, chief market strategist for Natixis. "It's the combination of those two things that presents a real problem."
For most countries, there are not enough younger workers to support an aging population in the next few decades. The chart below shows where countries rank on this metric now, and projections of where they will rank in 2030 and 2050.
A deficit of younger workers paying into retirement systems for older workers is a dilemma faced across the developed world. Even top-ranked countries for retirement security face this issue. Germany, Sweden and Denmark, all top 10 countries on the overall ranking, are in the bottom 10 for this measure.
This global retirement picture is playing out against a backdrop of slow economic growth worldwide and low momentum in productivity gains. "We see a bit more synchronization in growth rates around the world for the first time in seven or eight years," said Lafferty. "It looks like it is picking up in the near term, but it's limited in the long term unless we can unlock productivity gains, which are hard to come by." In the U.S., an unpopular solution to improve the finances of Social Security would be to raise the age at which Americans are eligible for benefits, Lafferty noted. "Social Security was designed in a period where the likely age of mortality was right around the early 60s, so right around when Social Security kicked in," he said. "As people live longer, it would make sense to extend that out."
While that may be a great mathematical solution, it's not a big vote-getter for politicians, he added. Also, even if many Americans want to work longer, they aren't always able to, because of ageism, disability, or changes in their industries.
All in all, finding solutions to retirement problems "takes public policy leadership, and there isn't an enormous amount of that out there right now," Lafferty said.
This article was provided by Bloomberg News.