Article by Alan P. Weiss, CFP®
Published in the June 4, 2017, New Haven Register
One obvious implication of living longer is that we will spend more time working. The expectation that retirement will start between early to mid-60’s will likely become a thing of the past or a privilege of the wealthy, according to a new study.
A white paper by the World Economic Forum (WEF) cites the challenges in the years ahead. Babies born in 2017 can expect to live to 100 – to the year 2117 or beyond. In Japan, which currently has one of the world’s most rapidly aging populations, retirement can begin at 60. With a projected life expectancy of 107, retirement could last over 45 years. What will be the impact on society when a population potentially spends 20 to 25 percent more time in retirement than in the workforce?
The big question is, how do we rethink our retirement systems that were designed to support retirement of 10-15 years? The WEF study says one obvious implication of living longer is that we’ll have to work longer. Early retirement as we know it today will disappear or apply only to the very wealthy, according to the study.
A key underlying factor is that the ratio of those in the workforce to those in retirement will plummet from 8.1 today to 4.1 by 2050, says the study. As it is today, the global economy can’t bear this burden. Inevitably, retirement ages will rise but by how much and how quickly demands urgent understanding by policymakers.
The paper also identifies five additional factors that are increasing the strain on global retirement systems: Lack of easy access to pensions; the long-term, low-growth environment; low levels of financial literacy; inadequate saving rates; and high degree of individual responsibility for managing pensions.
To protect against poverty in old age, the study believes retirement systems can and must be designed to provide a level playing field and opportunity for all individuals. A well-designed system must be affordable for today’s workers and sustainable for future generations.
Alan P. Weiss is the president of Regent Wealth Management Group in Woodbridge. He is also a CERTIFIED FINANCIAL PLANNER™. Readers are reminded that certain investments and investment strategies may not be appropriate for them and that all investments involve risks and uncertainties. Consult an expert of your choosing if you have questions about investments. More information is available at www.regentwealth.com.)