Edward Farrington, EVP of Institutional and Retirement at Natixis Investment Managers, joins The Final Round to discuss Natixis' 2020 Global Retirement Index and where the U.S. ranks.
MYLES UDLAND: All right, welcome back to "The Final Round" here on Yahoo Finance. Myles Udland with you in New York. Time now for our weekly retirement segment, brought to you by Fidelity investments. Well, Natixis is out with its latest Global Retirement Index, looking at the best countries to retire to. We'll talk about where the US maybe ranks in there. For more on that, we're joined now by Ed Farrington. He's the Executive Vice President of Institutional and Retirement over at the Texas Investment Managers.
Ed, let's start with the latest report, what it says about the global state of retirement, and then maybe we'll get into some concerns or constructive things that we're seeing out here stateside.
ED FARRINGTON: Sure. Well, first and foremost, Myles, thanks for having me. So we've been producing this index now for about 10 years. And really what it's meant to do, is just be a window into the different systems throughout the world and how conductive are those to people living a quality life in retirement. And certainly, these times are quite challenging. When I think about the effects of just the news that you're speaking about today, jobs, if people are losing jobs, and this impacts people throughout the world, then they're not participating in their workplace savings plan.
Or even worse, in a lot of the systems, I think 14 of the 40 countries we measure, they're actually allowing folks to tap into their retirement savings early as a hardship withdrawal, which is great in the short term, but it can cause real problems long term. So the survey really does allow us to see how some of these things work, and things that don't work. And hopefully, our policymakers here in the US can look at it and start to use the good things and put away the bad.
MYLES UDLAND: Well, so then let's talk about the top three countries. Obviously, extremely different countries from the US in terms of size and scope and all that, but we have Iceland, Switzerland and Norway. And when I think of at least the last of those three countries, I think about a massive sovereign wealth fund. That's certainly helps the citizens there. But I mean, again, realizing that these countries have a small fraction of the population we have, what are some of the things that those three are doing well that rank them so high on this list?
ED FARRINGTON: Yeah, and it's pretty consistent now for the last 10 years, that the northern European countries do quite well. And it really goes back to two things. First and foremost, public health systems. So retirees have access to quality health care. And they're not having to tap into their own savings in order to access that.
And then secondly, the countries of high per capita income and paired with high income equality. So a broad amount of folks are participating in economic gains, so they can save more. So those are really the things that shine and I've been very consistent. You're right. The countries are different. It's a difficult comparison for the US, because of the size and scope of our economy. But we can learn from those places and try and march a little bit closer to those things each year.
MYLES UDLAND: And so then I guess in thinking about a national retirement system, I mean, I'm not really sure governments 40, 50 years ago thought all that much about their retiring population. But now we've all seen the charts of the demographic shift happening in the entire developed world. I mean, is this maybe policymakers on the fly trying to figure out how to make these sorts of programs work?
ED FARRINGTON: Yeah, it certainly is, and we see in the US for example, we know that when someone gets access to a workplace savings plan. So it's most likely a 401(k) plan. If they begin participating, the employer matches, and they do it early enough, that system works. That creates really strong outcomes.
The problem is, too few people who go to work every day actually have access to a plan. I think the number is less than 60% of people in this country have access to a workplace savings plan. So we know that system works if it's used, if the incentives are in place, and we need to find a way to make it more available to more folks.
MYLES UDLAND: And then maybe just finally wrapping up, thinking about the US and thinking about this year specifically. Conversations that you guys have had with clients or even just internally about how to manage through this crisis. Where do things stand as we get into the fourth quarter? What did March look like to you guys? And how does the retirement picture, I guess in the US, how has it changed over the last six months?
ED FARRINGTON: Yeah, it's definitely changed. And one of the things that we're very aware of and try to provide counsel on, is a low rate environment can be great for stimulating economic activity. But if you're a retiree and you need to outpace inflation, more and more we're seeing folks take more risk. So they're still investing in the stock market well past their retirement, which creates this exposure to volatility and can create a tremendous amount of anxiety.
Or worse, if you're withdrawing on a really bad day, on a downdraft day, you're taking out too much of a percentage of your assets. So we're trying to provide counsel on how to outpace inflation in an environment like this, but do it in a way that's going to allow you to stay invested over the long term and not scare you out of the markets.
MYLES UDLAND: All right, Ed Farrington with Natixis Investment Managers. Ed, thanks so much for joining us today.
ED FARRINGTON: Thanks so much.