Global Retirement Crisis?

[explanade]

So the World Economic Forum sees a looming shortfall of retirement savings for people around the world.

In 2015, this shortfall is estimated to be $70 trillion but by 2050, it could balloon to $400 trillion.

It appears their definition for sufficient retirement savings to fund a full retirement is 70% of pre-retirement income not counting Social Security or similar govt. programs.

One of the reasons is that there's an overall trend towards pushing workers towards defined contribution plans, or shifting the burden from companies/govt. to workers to save enough.

And then they compare that against average life expectancy resulting in most people falling short of having enough by around 10 years -- 8.3 for men, 10.9 for women, 9.7 combined, for 65 year olds.

And the highest shortfall are Japanese women, around 20 years, because they have the highest life expectancy at 87.1 years but even more interestingly, they invest to conservatively:

While Japanese workers save no less than others, they tend to invest in very safe assets that produce few gains over time, Yik said. As a result, average savings in Japan are only enough to cover 4.5 years of retirement.

Meanwhile, life expectancy at birth for Japanese women is 87.1 years -- the highest in the world, according to the Organization for Economic Cooperation and Development -- and 81 years for men.

https://www.bloomberg.com/news/arti...sk-running-out-of-money-a-decade-before-death


Unfortunately, people in the last 10 years of their lives may not be able to command enough political help. They may vote but already there's intergenerational hostility -- some people in their 20s and 30s believe Social Security and Medicare won't be available for them and blame Boomers for the situation.

If older people continue to work past 65 years of age, that will probably alienate the younger people even more.

 

[NW-Bound]

Japanese people invest too conservatively? Their Nikkei is going nowhere for the last 30 years. Are they allowed to invest in foreign stocks?

 

[HI Bill]

So, mankind is generally myopic, and would rather spend today than save for tomorrow. Nothing to see here, move on.

 

[marko]

We should have a forum thread dedicated to the "Crisis of the Week".

(Trying to be light here. No offence intended to the OPs past or current)

 

[samclem]

From the article:

The forum assumed retirees would need enough income to cover 70% of their pre-retirement pay, and didn’t include Social Security or other government welfare payments in the total.

1) I think most Americans would be surprised to find that Bloomberg believes SS is welfare

2) Why disregard SS or the other government old-age programs available in other countries? For some Americans, SS is all they have and all they ever planned on having for retirement income. And they get by okay.

3) As we've noted here frequently, why is XX% (70% in this case) of pre-retirement pay the baseline for retirement spending? Many folks on this forum and elsewhere didn't spend 70% of their income even during their earning years (due to savings, charitable giving, etc. And if 'pay' means "before taxes", then the situation is even crazier).

Nothing to see here, IMO. Clickbait.

 

[USGrant1962]

...

It appears their definition for sufficient retirement savings to fund a full retirement is 70% of pre-retirement income not counting Social Security or similar govt. programs.

...

So the whole article is innumerate, meaningless propaganda. Got ya.

When studies ignore/discount major sources of income (usually for retirees and "the poor") they are clearly pushing an agenda.

And I checked, your summary is accurate.

 

[Just_Steve]

If older people continue to work past 65 years of age, that will probably alienate the younger people even more.

On a scale of 1-10 that rates about a negative 100.

 

[Running_Man]

From the article:
1) I think most Americans would be surprised to find that Bloomberg believes SS is welfare

2) Why disregard SS or the other government old-age programs available in other countries? For some Americans, SS is all they have and all they ever planned on having for retirement income. And they get by okay.

3) As we've noted here frequently, why is XX% (70% in this case) of pre-retirement pay the baseline for retirement spending? Many folks on this forum and elsewhere didn't spend 70% of their income even during their earning years (due to savings, charitable giving, etc. And if 'pay' means "before taxes", then the situation is even crazier).

Nothing to see here, IMO. Clickbait.

Total agreement with this post, it is very possible for a married couple to have 60-70K in SS income and pay no federal tax

 

[Dtail]

Needing 70% of pre retirement is a passe concept. Members here know it is your expenses and net WR% that counts.
If I needed 70% of pre retirement income I could never retire.

 

[rk911]

for a good portion of my adult life i had been hearing about the 3-legged stool of financial retirement planning:

- social security
- pension
- and, lo and behold, savings and investments about equal to 70% of pre-retirement income.

the more things change the more things stay the same.

 

[explanade]

Needing 70% of pre retirement is a passe concept. Members here know it is your expenses and net WR% that counts.
If I needed 70% of pre retirement income I could never retire.

Is that true for ER people?

Did they only target just having enough and high probability that "just enough" will last decades?

Or do they aspire to have at least the same spending power as before retirement, when many of them were at their peak earning period?

 

[Amethyst]

Well it varies, of course. Recall what earlier posters have said about being used to living on 50% or less vof their working income. They trade low spending for early freedom.

Is that true for ER people?

Did they only target just having enough and high probability that "just enough" will last decades?

Or do they aspire to have at least the same spending power as before retirement, when many of them were at their peak earning period?

 

[Dtail]

Is that true for ER people?

Did they only target just having enough and high probability that "just enough" will last decades?

Or do they aspire to have at least the same spending power as before retirement, when many of them were at their peak earning period?

Depends to some extent.
2 scenarios.
1 - The person earns let's say 50-75k heavy LBYM savings and investing. That person will probably wish to have a lifestyle at least equal to pre retirement and has the extra monies not being saved anymore.
2 - Person is earning in the low to middle 6 figure range, also LBYM. That person probably does not have to necessarily live on 70% of pre retirement income. This is my personal example.

 

[Teacher Terry]

We live on 35% of our gross now. When working our HI was cheap and now it’s expensive. The article is out of touch with reality.

 

[marko]

They may vote but already there's intergenerational hostility -- some people in their 20s and 30s believe Social Security and Medicare won't be available for them .

Forty five years ago when I was 20 I believed the same thing.

 

[FIREd]

Based on their definition, I am facing a retirement shortfall. However, it takes much less than 70% of my pre-retirement income to maintain my working years’ lifestyle (more than half of my income was either saved or sent to the IRS back then).

 

[Teacher Terry]

I noticed on Facebook people complain that the boomers are the reason young people have it hard. I don’t remember our generation picking on our parent’s generation.

 

[Spock]

A lot of the less sophisticated retirement calculators require the "70% of current income" as the minimum income in retirement. We lived well on 25% of my gross income. So I constantly had to adjust my current income downward in the calculators until my annual retirement spend = todays budget (plus "stuff" like healthcare).

So... make a flawed assumption (70% of pre-retirement income required), come to a flawed conclusion.

 

[rk911]

we’ve been FI for quite some time now but the ”plan” was always to consider the investments as gravy snd not for everyday living. we both retired at 55 which was the the soonest we could pull our pensions (mine came with a 2.5% “penalty” for being 5-yrs “early). we’ve had no debt for a long tine so our lifestyle in retirement is more or less the same as it was in the decade before retirement.

 

[rk911]

I noticed on Facebook people complain that the boomers are the reason young people have it hard. I don’t remember our generation picking on our parent’s generation.

yet another reason to avoid FB.

 

[marko]

I noticed on Facebook people complain that the boomers are the reason young people have it hard. I don’t remember our generation picking on our parent’s generation.

I think we were born before the "it's someone else's fault" mindset became the societal trend.

 

[Spock]

yet another reason to avoid FB.

While not a facebook fan, ignoring one of the larger mediums by which that generation communicates is putting your head into the sand as to what they are saying.

 

[unclemick]

Hmmm - like many on this forum saved early and often.

12% of pre retirement income my all time bad attitude best with ballpark 18 - 25% in early years of ER. Time and chance over 25 years of ER - pre tax now 2x pre retirement income.

That said I have a few known persons moved to Mexico and one went back to work in his 70's saving a nest egg for Ecuador.

heh heh heh - Soo will we have retirement migration worldwide in coming decades? We know downsize-rs and movers to lower cost of living areas.

P.S. Started investing 1966 - even before Bogle's Folly. Time in the market has been kind to me.

 

[rk911]

i really don’t give a you-know-what about what a group of whiney living-in-momma’s-basement snowflakes have to say.

i really hope that those types do not speak for or represent the majority. virtually all of the
millennials i have met and spoken with have been hard working men and women who share many of my values. none of them are whiners; all of them are gainfully employed.

 

[Big_Hitter]

I noticed on Facebook people complain that the boomers are the reason young people have it hard. I don’t remember our generation picking on our parent’s generation.

you mean like when I had to go to school in all the temporary buildings that had to be erected because there were too many kids born before 1964?

you mean like when I went to college and they had all these dumb rules about staying out too late and drinking because all the kids born before 1964 ruined it for everyone?

you mean like when I got out of college and there weren't any jobs because the oil business was in the tank and all the kids born before 1964 were laid off and looking for anything, like even actuarial analyst jobs?

like that?