According to the latest Natixis Investment Managers Annual Global Retirement Index a retirement specialist the warning bells are ringing and the gauges are flashing bright red in 2022 as key risk concerns for retirement security reach a boiling point in today’s rapidly changing economic environment.
After many years rising inflation is regaining prominence for retirees. It claims that rising oil food and housing prices are eroding purchasing power and teaching a critical economic lesson to those still planning for life after work. Inflation is a direct threat to retirement security. Rapidly rising costs can pose a significant threat to retirees’ financial security by eroding purchasing power.
Americans are losing ground to residents of other countries in what is shaping up to be “one of the worst years to retire in recent memory ” according to Bloomberg’s retirement ranking. Income equality for which the US ranked seventh out of 44 countries in the index was cited as one of the reasons for the country’s low score along with government debt and tax pressure.
Norway topped the list moving up from third place last year thanks in part to its five-year average interest rate turning positive in 2022. Switzerland Iceland Ireland and Australia rounded out the top five. The United Kingdom was ranked 19th one spot lower than the previous year.
Bloomberg stated: “It’s becoming more difficult to retire almost anywhere as high inflation volatility in financial markets rising interest rates and aging populations add to financial stress on pension plans and government benefits.”
With markets down interest rates still relatively low and inflation eating a large chunk out of retirees’ wallets those who leave the workforce risk-taking retirement distributions from an already depleted pool of assets.
At the same time Natixis believes they will have to take more risks with their portfolio to make up for lost ground. “Both will make it hard to preserve retirement savings and make it harder to attain a secure retirement but with 20 years ahead in retirement there is still time for 2022’s retirees to reset their plans.”
According to its survey underestimating the impact of inflation is the number one mistake investors make in their retirement planning around the world.
“Institutional investors will be challenged to preserve assets in a more volatile investment environment.”
“Perhaps more than any other factor it [inflation] has the potential to upset the plans that have taken decades for millions of people to realize by simply eroding the value of what they’ve worked so hard to accumulate.”
The Office for National Statistics has reported that the UK has seen a rise in part-time work among Britons over the age of 65 hitting a record high of almost 1.5 million in the second quarter of 2022.
“The increase in people working past the UK’s state pension age could reflect rising cost of living pressures forcing some out of retirement matching trends seen in the US.”
“In the three months to June 1 468 000 people aged over 65 were in work a jump of 174 000 from the previous quarter taking the employment rate for this age group to 11.9 per cent. Both the rate of increase and the level of employment were the highest on record according to the ONS.”
Data also showed that older people are turning to contract work to supplement their incomes as inflation and stock market declines erode the value of retirement savings.
It seems that Covid and its Great Reset plan have done everything except bring life back to normal.