The Best (and Worst) Countries to Plan to Retire

Man calculates money on calculator along with piggy bank

Planning to retire | iStock.com

Retirement comes at you pretty fast. If you don’t stop and save once in a while, you could miss it. Saving as early as possible and on a consistent basis is a golden rule in personal finance, no matter where you live. This makes sense considering the price tag attached to a multi-decade retirement. However, workers across the globe continue to struggle with retirement planning.

Saving enough money for retirement is easier said than done, regardless of the language. Only 38% of employees globally are habitual savers, meaning they always make sure to save for retirement, according to new research from Transamerica Center for Retirement Studies (TCRS) in collaboration with the Aegon Center for Longevity and Retirement. That’s down one percentage point from last year. A paltry 23% save for retirement occasionally, and 21% are not saving for retirement but claim they intend to do so. Six percent have never saved for retirement and don’t intend to. The study polled 14,400 workers and 1,600 retirees in 15 countries.

Making matters worse, respondents expect retirement to last on average 20 years. Two decades is a long time to afford, but even that estimate may fall short. Couples age 65 today have about a 50% chance that at least one person in the relationship lives to age 90. Depending on your health and family history, a retirement lasting 30 years or longer is not unthinkable.

Who’s getting ready for retirement?

Let’s take a look at the 10 best and worst countries for retirement planning, using the Aegon Retirement Readiness Index (ARRI). The index measures retirement preparedness on a scale from 1 to 10, with scores of 8 and higher considered to be high retirement readiness, scores of 6 to 7.9 as medium, and less than 6 as low. The ARRI is based on survey responses to six questions related to personal responsibility, awareness, financial understanding, retirement planning, financial preparations, and income replacement.

We’ll start by taking a look at the worst countries, and end on a better note with the best prepared countries. Surprisingly, the United States ranks better than you think.

5. France

France

France | Photo by Mike Hewitt/Getty Images

AARI: 5.3

France ranks as the No. 5 worst country for retirement readiness out of the 15 countries analyzed. It’s AARI for 2016 is 5.3, which is a slight decrease from 5.4 in 2015. While 25% of citizens feel very responsible for personally making sure they have sufficient income in retirement, the government is expected to provide 44% of their retirement income. In 2010, France pledged to raise its official retirement age from 60 to 62 years, but that decision was reversed two years later. French respondents expect to retire at a mean age of 64, when they expect to retire from all paid employment. However, 20% admit they have no retirement plan in place.

4. Poland

Source: Marcin Lobaczewski/AFP/Getty Images

Poland | Marcin Lobaczewski/AFP/Getty Images

AARI: 5.3

Poland ranks as the No. 4 worst country for retirement readiness. The country’s AARI also comes in at 5.3. On the positive side, Poland’s AARI has increased for three consecutive years. Residents expect the government to provide 56% of their retirement income, the second-highest in the analysis and well-above the global average of 46%. Only one in five workers are offered a workplace retirement plan with employer contributions. Citizens expect to retire at a mean age of 64. Many citizens may need to work in their golden years due to employee benefits. In Poland, 76% of workers have access to employer-sponsored medical insurance.

3. Hungary

Hungary

Hungary | ATTILA KISBENEDEK/AFP/Getty Images

AARI: 5.0

Hungary ranks as the No. 3 worst country for retirement readiness. The country’s AARI is 5.0, down from 5.1 in 2015. Residents expect the government to provide 55% of their retirement income, the third-highest in the analysis. Like Poland, only one in five workers are offered a workplace retirement plan with employer contributions. Citizens expect to retire at a mean age of 65, above the global average of 63. Hungarians only expect their retirement to last about 16 years. A whopping 34% say they are very unprepared for retirement, and are hardly saving any money — the highest percentage out of the 15 countries analyzed.

2. Spain

Spain

Spain | Pablo Cuadra/Getty Images

AARI: 5.0

Spain ranks as the No. 2 worst country for retirement readiness. Its AARI of 5.0 is the same as Hungary, but no progress has been made since TCRS started analyzing global retirement readiness. In 2012, Spain’s AARI was also 5.0. Adding insult to injury, residents expect the government to provide 64% of their retirement income, the highest of any country surveyed. They also expect their retirement to last about 21 years. Twenty-three percent of respondents say they have no retirement plan (the highest in survey), and 27% admit they are unprepared for retirement and are hardly saving any money.

1. Japan

Japan

Japan | Photo by Tomas Coex/AFP/Getty Images

AARI: 4.7

Japan ranks as the worst country for retirement readiness. The country’s AARI is a meager 4.7, down slightly from 4.8. Since 2012, Japan has barely been able to move its AARI up from 4.6. On a positive note, residents expect the government to provide 52% of their retirement income, more in line with the global average compared to most of the other countries previously mentioned. They expect to retire at a mean age of 65, with retirement lasting about 16 years. Twenty-one percent of respondents say they have no retirement plan, while only 5% say they have a well-developed plan. Japan’s negative interest rate policy also isn’t helping matters. Thirty percent say they are very unprepared, and are saving hardly anything for retirement.

By contrast, let’s take a look at the best countries for retirement planning.

5. United Kingdom

Big Ben

Big Ben | NIKLAS HALLE’N/AFP/Getty Images

AARI: 6.1

The United Kingdom ranks as the No. 5 best country for retirement readiness. The country’s AARI moved slightly higher from 6.0 in 2015, and is the second-biggest improver of the nine original countries from 2012, when its AARI was only 5.3. Residents expect the government to provide 42% of their retirement income, considerably less than the worst-ranked countries due to widespread access of defined contribution retirement plans. It’s estimated that automatic enrollment plans in the workplace pulled an additional five million people into the retirement savings market. Only 11% say they have no retirement plan, and 72% believe individuals should save for themselves through private pensions and other investments.

However, the country’s recent vote to leave the European Union will undoubtedly change how well it ranks in the future. The so-called Brexit is shaking world markets and will likely attract attention for years to come, as the exit process is expected to take 2-4 years.

4. Germany

Germany

Germany | Source: iStock

AARI: 6.1

Germany ranks as the No. 4 best country for retirement readiness. The country’s AARI was unchanged from last year at 6.1, but it has edged higher from 5.9 in 2012. Though the euro crisis is far from over, residents expect the government to provide 52% of their retirement income. They also expect to retire at a mean age of 65, with retirement only lasting 17 years. Nearly half of respondents say they are very aware about the need to plan financially for retirement, and only 12% say they have no retirement plan. Almost a quarter of respondents believe they are very able to understand financial matters.

3. United States

America

America | Joe Raedle/Getty Images

AARI: 6.7

Despite all the scary retirement statistics, the United States ranks as the No. 3 best country for retirement readiness. In fact, the U.S. is the biggest improver among the nine original countries. In 2012, the AARI was only 5.6. This is partly due to a strong stock rally boosting retirement accounts. Forty-nine percent of Americans say they are aware of the need to financially plan for retirement, second only to the next country on the list. Furthermore, 39% believe they are very able to understand financial matters. While financial literacy rates may differ with that belief, it’s encouraging that 54% of Americans polled consider themselves to be habitual savers.

2. Brazil

Brazil

Brazil | YASUYOSHI CHIBA/AFP/Getty Images

AARI: 6.7

Brazil ranks as the No. 2 best country for retirement readiness. The country’s AARI of 6.7 is unchanged from last year. Brazilians have some of the highest retirement expectations in the world. Respondents believe they’ll retire around age 61, and that retirement will last 26 years. Only the Chinese expect to have a longer retirement (28 years). Fifty-two percent of respondents say they feel very responsible for making sure they have enough income for retirement. They also expect the government to provide 48% of their retirement income. Fifty-four percent say they are aware of the need to plan for retirement, the highest in the analysis.

1. India

India

India | Source: iStock

AARI: 7.3

India ranks as the best country for retirement readiness. The country was added to the study in 2014 with an AARI of 6.96. An impressive 59% of respondents consider themselves as habitual savers. The report notes that habitual savers are seven times more likely to achieve a high AARI score than non-savers. Residents expect to retire at a mean age of 60, with retirement lasting 22 years. Half of respondents feel personally responsible for making sure they have enough retirement income, while 54% are very aware of the need to save for their golden years (the highest in the analysis). Thirty-one percent say they have a well-developed retirement plan, also the highest out of the 15 countries in the analysis. Only 25% of retirement income is expected to come from the government, ranking the lowest.

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