By Cyril Tuohy
Nations best equipped to meet the needs of future retirees emphasize simplicity of retirement plan design, according to a global retirement index issued by Natixis Global Asset Management.
The Global Retirement Index survey provides some idea of where the United States ranks relative to other nations with regard to meeting retirement needs through its retirement system.
This year, the U.S. – sixth highest in per capita income – finished a relatively low 19th, behind several European nations, Australia, New Zealand, Canada and South Korea. The U.S. was ahead of Israel. The survey also found New Zealand, Iceland and South Korea improved the most in the last year.
One of the defining elements of a good retirement system is that it is relatively simple in overall design and structure, the authors of the survey said.
John T. Hailer, chief executive officer of Natixis Global Asset Managing in the Americas and Asia, said that some policies and practices in some regions “could hold valuable lessons for other nations, such as the U.S., which needs to shore up its retirement system.”
Retirement plan experts have testified to the unnecessary – and growing – complexity that hobbles the U.S. system.
In the U.S., the individual retirement account (IRA) sphere alone is awash in acronyms that few people understand and that fewer still – except for tax attorneys and financial advisors – have any clue about when it comes to tax implications.
IRAs, for example, have cousins in the form of Roth IRAs, but both carry different tax implications with regard to contributions and distributions.
Joining the IRA family from the employer-sponsored world are SIMPLE IRAs for small employers, and supplementing executive retirement plans (SERP) for top managers working for large corporations.
Add those to the alphabet soup that comes with defined contribution plans, 401(k)s, 403(b)s and 457s, and it’s clear that the U.S. retirement system has grown into a patchwork of plans to meet the narrow individual circumstances of separate classes of employees.
The gradual “layering” of plans onto the existing retirement network has added cost and complexity, yet huge swaths of workers in the U.S. are still not covered. New bills pending in Congress aim to fill those gaps, but also add new layers of options.
Retirees in countries that enjoy the greatest financial security in retirement live in Switzerland, Norway, Austria, Sweden, Australia, Denmark, Germany, Finland and New Zealand.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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