Skip to main content

You are here


What Determines ‘Retirement Happiness’?

Many countries consistently receive high rankings for their retirement systems, but does that mean they also have the happiest participants? A new report delves deeper into the drivers of happiness in the context of retirement and finds that that’s not necessarily the case.

State Street Global Advisors’ “The Global Retirement Reality Report: The Happiness Formula” compared the objective rankings of various retirement systems with qualitative results from a survey of over 9,500 respondents in eight countries. It found that the familiar, quantitative studies weren’t telling the full story, given the gap between savings sufficiency and optimism about one’s retirement future.

For example, the Netherlands has the highest Melbourne Mercer Global Pension Index ranking and maintains a very high level of coverage, participation and savings rates, yet the country has the lowest level of satisfaction in retirement of all the countries surveyed. In the United States, however, savers in DC plans are very confident and optimistic about their prospects, and are generally happy in retirement, despite a comparatively lower index ranking.

“With this study, we are looking to identify the factors across a number of retirement systems that drive retirement happiness, which can become best practices that are applied as retirement systems shift to have an increased reliance on the Defined Contribution model,” notes David Ireland, head of Global Defined Contribution at State Street Global Advisors.

According to the findings, key factors driving retirement happiness were a combination of trust in a country’s retirement system stability, a strong feeling of ownership regarding their own outcomes and being well preparedin terms of accumulated retirement assets.


Stability and credibility of a country’s retirement system helps establish trustwhereas recent changes or the expectation of change at the policy level, such as alteration of retirement age, erodes trust. One example, not surprisingly, is the move by many countries from a DB structure to a DC model whereby transformational retirement reforms may introduce confusion and doubt to savers. And while the systems themselves may be strong, savers’ uncertainty can erode trust, the report notes.

As a result, SSGA recommends keeping retirement plans as simple and stable as possible by limiting changes, or when changes need to be made to communicate them well in advance and provide clear illustrations of the probable impact.


Individuals who embrace ownership and control of their retirement outcomes are found to be happier. SSGA found that if people accept that they are responsible for their retirement and understand the choices they can make, they feel more secure. Respondents in the U.S. and Australia – where there is an established tradition of individual retirement responsibility through DC savings – were the happiest in the survey.

The report emphasizes that responsibility isn’t limited to the task of contributing to a retirement plan, but it also includes being aware of plan details. This level of awareness was found to be consistent with the degree of DC dependency in each country. For example, 90% of U.S. and 77% of Australian workers are aware of their current savings levels versus 46% of Dutch and 35% of Italian workers.

Knowledge of tax benefits and investments also appear to be consistent with how established the DC structure is, the report notes. When it comes to familiarity with the tax benefits associated with retirement savings, 80% of U.S. versus 16% of Dutch workers expressed an understanding. And with regards to investments, 71% of U.S. versus 13% of Dutch workers said they are aware of how their retirement portfolio is invested.

Interestingly, respondents in the U.S., Australia and Ireland were found to be much more likely to seek advice and be prepared to pay for it, than those in continental Europe. The authors suggest that this may be partly due to the legacy of the state-based European systems versus individual-centric Anglo-Saxon approaches. As an aside, the study found that, while Swedes are reluctant to seek advice and expect advice to be free, they rank highest among the continental countries in terms of accepting individual responsibility for retirement saving.

To build workers’ confidence in owning their retirement destiny, SSGA recommends illustrating the impact of actions that participants can take, such as changing their savings rate, retirement age or investment allocation. The firm also suggests that it’s important to provide easy access to trustworthy sources of guidance – whether online, in person or by phone.


Having sufficient retirement assets, not surprisingly, was found to be critical in determining retirement readiness and satisfaction. Here again, the U.S. led this ranking with a third citing extreme confidence in their sense of financial preparedness for retirement, while half of the respondents in the UK and Netherlands reported being not at all confident.

The challenge, however, is determining how much is “enough” and understanding whether savings will be sufficient. The study notes that few people understand how to convert a relatively large lump sum into a dependable income for life, making the definition of sufficiency elusive.

The firm recommends providing participants with clear income projections so they can understand whether they are on track for a secure retirement and educate them on how much they would need to save to achieve certain goals.