Apparently good things do come to an end. The global pension outlook is looking bad and a large part of this stems from people living longer and simply not saving enough while they work. There are some major problems on how pensions are structured and the US, the wealthiest nation in the world is shifting to a ‘work until you die’ retirement plan. And this is for the richest nation so you can imagine how things look in other countries. Most people continue to ignore these massive problems but it is hard to miss the fact that by 2050 global pension funds will be underfunded by $400 trillion. Does this sound sustainable?
The global pension problem
There are some major reasons as to why this problem is occurring. For one, long-term growth has slowed and returns are simply not looking great. Many pension funds have optimistic return rates that are just unsustainable. We are in a lower return market.
Another issue is that people simply do not save enough for retirement. In the US half the country is living paycheck to paycheck. The recommended savings rate is 10 to 15 percent of annual salary but that just isn’t happening across the board. With the shift from defined benefits to 401k casinos, people are now left with virtually nothing for retirement (outside of Social Security).
This post was published at MyBudget360 on July 27, 2017.
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