Natixis Investment Managers' index highlights impact of reduced material wellbeing and taxes on Canada's ranking
Most people retire in the country they are already living in, potentially their home nation. But is that a good idea for Canadians in 2022?
A new analysis of the best countries for retirement suggests that things have worsened for Canada’s retirees with 14 options that might be better.
The Natixis Investment Managers 2022 Global Retirement Index (GRI) sees Canada fall from the top 10 for the first time since 2017 largely because of a decrease in material wellbeing, tax pressure, its rapidly aging population, and a slide in the overall happiness of the Canadian people.
For example, on the wellbeing metric Canada only ranks 27th but fares better on finances (12th), and quality of life (16th), although still outside the top 10.
The country shows a slight improvement in the health sub-index due to a greater expenditure per capita compared to last year.
Canada ranks highly for life expectancy, ahead of other developed nations, but this can mean an underestimation of the amount of retirement savings required due to duration, along with the cost of healthcare.
Who’s doing better?
While some Canadians may consider retiring to Florida, Costa Rica, or even Panama according to a 2021 survey, none of these make the Natixis top 10 either.
In fact, the US would appear be a worse choice than staying at home, ranking 18th compared to Canada’s 15th and the report shows travelling overseas would provide a better retirement.
The top 10 for 2022 are:
- Norway
- Switzerland
- Iceland
- Ireland
- Australia
- New Zealand
- Luxembourg
- Netherlands
- Denmark
- Czech Republic
Retirement security
The Natixis research highlights a worsening of retirement security over the past year.
Higher interest rates impact market volatility in the immediate term, although may provide greater income in the future. This is a challenge for both individuals and pension funds whose funding ratios are affected.
Steep market losses, inflation and interest rate hikes have made this year one of the worst on record in which to retire.
Old-age dependency is also a concern, with some countries facing tougher times than others.
Looking at the old-age dependency ratio – that is the number of people aged 65+ per 100 people of working age – Canada is currently at 29.8. That’s roughly in line with the US, UK, and Australia, below Germany and Japan, but above China and Mexico.
However, by 2050, Canada is expected to see a surge to 44.9, putting more pressure on public pension systems with fewer people contributing and more claiming.
Solutions to the retirement security crisis will be increasingly difficult for Canada, and other countries with a pay-as-you-go retirement system, on which the US Social Security and many elements of the Canada Pension Plan are based.
Retirement planning mistakes
Natixis IM’s survey highlighted several common mistakes made in retirement planning.
These include underestimating the impact of inflation and how long individuals will live, and overestimating investment income and being too conservative with their investments.
