The U.S. fell one spot to No. 17 among developed countries in Natixis Investment Managers’ 2021 Global Retirement Index, as Iceland topped the rankings for the third consecutive year. The ninth annual report provides a snapshot of the relative financial security of retirees in 44 countries.
Separately, a survey of 401(k) participants found that the pandemic has contributed to financial stress for younger workers more so than for older workers, and a federal report determined that almost 700,000 seniors were behind on their mortgage payments in July, raising concerns about a possible spike in homelessness among older Americans.
Here’s the latest Barron’s roundup of retirement-related news and research.
U.S. Slips One Spot in Retirement Rankings
In a survey of 750 individual U.S. investors, Natixis found that 41% believe they will “need a miracle” to retire comfortably and 34% think that retirement might never be an option. In addition, 49% avoid thinking about their retirement security because the challenge seems too daunting, and 59% believe they’ll have to work longer than they originally had planned, according to the report.
Survey respondents had median retirement savings of $350,000, compared with a median of $65,000 for all Americans, according to the report.
Economic consequences from the pandemic such as increased government debt, rising inflation, and low interest rates for investment vehicles are causing many Americans to feel that “their retirement dreams are slipping away,” according to the report.
“The pandemic has exacerbated financial inequality and accelerated long-term trends that are eroding the prospect of retirement security for many,” said Jim Roach, senior vice president of retirement strategies at Natixis, which says it has $1.4 trillion in assets under management.
To rank countries according to retirement security, the GRI examines 18 metrics grouped into four categories:
● Material well-being—The material means to live comfortably in retirement. The U.S. ranked 26th in this category.● Finances in retirement—Access to quality financial services to help preserve savings value and maximize income (U.S. ranked 11th.)● Access to quality healthcare services (U.S. ranked 17th.)● Quality of life—A clean, safe environment in which to live (U.S. ranked 21st.)
After Iceland, the next six countries also retained their positions from 2020, with Switzerland ranked second, followed by Norway, Ireland, Netherlands, New Zealand, and Australia. Germany moved up two places to eighth.
Survey: Younger Workers Feeling Financial Stress
Younger workers are significantly more likely than older workers to be so stressed out about their finances that they struggle to perform their job duties, according to a survey from Schwab Retirement Plan Services. The survey found that 44% of Generation Z workers said financial worries were hurting their job performance, compared with 38% of millennials, and 24% of all workers.
Catherine Golladay, head of Schwab Workplace Financial Services, said the “stressful environment” created by the pandemic has had an outsize impact on younger workers because they “are just starting their careers at a time of upheaval at home and in the workplace—from new health and safety challenges to the rapid expansion of virtual offices and dramatic swings in our economy and markets.”
In early April, Schwab polled 1,000 active participants in 401(k) plans at companies with at least 25 employees, plus an additional 100 plan participants from Generation Z. The survey defined Generation Z as workers ages 21 to 24, while millennials were 25-40, Generation X were 41-56, and baby boomers were 57-70.
Only 10% of boomers were experiencing financial stress that affected their job performance, compared with 20% of Gen X. Younger workers were more likely to predict that Covid-19 will delay their retirement, with 35% of millennials saying so, compared with 32% of Gen Z, 20% of Gen X, and 13% of boomers.
Gen Z savers are the most likely to say that they don’t know which investments to select within their 401(k) plans, with 51% saying that, compared with 32% of older participants.
The survey found that Gen Z and millennials were significantly more interested in having annuity options within their 401(k)s, the ability to purchase fractional shares of funds, and ESG investing options that take into account companies’ environmental, social and governance records.
Among Gen Z participants, 45% said they wish they could purchase annuities within their plan, compared with 52% of millennials, 39% of Gen X, and 26% of boomers. As for wanting more ESG options, it was 41% for Gen Z, 43% for millennials, 29% for Gen X, and 12% for boomers. Among Gen Z, 41% wanted the ability to purchase fractional shares, compared with 39% of millennials, 25% of Gen X, and 13% of boomers.
CFPB: Nearly 700,000 Seniors Behind on Their Mortgage
About 4.4% of seniors with a mortgage are behind on their payments, with non-white homeowners and those making less than $25,000 a year most likely to be in arrears, according to the U.S. Consumer Financial Protection Bureau.
In July, about 682,400 homeowners ages 65 and older were behind on their mortgage payments, and an additional 236,000 who were current had no confidence they would be able to make their next month’s payment, according to the CFPB.
The number of seniors missing payments appears to be trending downward, however, having briefly topped 1 million homeowners in the summer of 2020 and last February, according to the agency.
The CFPB’s report cites data from the Census Bureau’s Household Pulse Survey, an online poll evaluating the economic and social impacts of Covid-19 on U.S. households. About 19,400 seniors took the survey June 23 through July 5, including 5,800 homeowners.
Only 2.7% of white seniors with mortgage payments reported being behind in July, compared with 10% of non-whites. Similarly, 3.4% of seniors with mortgages who had incomes of $25,000 or more were behind, compared with 17.7% of those with lower incomes, according to the CFBP.
Of the seniors who were behind, 52.4% reported living in a household with three or more people, while 39.4% lived with one other person, and 8.2% lived alone. Children are present in 33% of these households, and 20.4% of these homeowners report that they sometimes or often lack enough food during the week.
About 36% percent of seniors missing mortgage payments said a job loss by a household member was a principal cause. In addition, 12.2% of seniors who were behind on their mortgage payments report that they’ll likely face foreclosure. That’s on top of the 188,700 seniors who are behind on rent payments and face eviction, the CFPB said.
bARRON’S rETIREMENT rOUNDUPS
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