·
A 20-year savings gap for
Japanese women is world’s biggest
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Global retirement shortfall
could top $400 trillion by 2050
One of the toughest problems retirees face is making sure their
money lasts as long as they do.
From the U.S. to Europe, Australia and Japan, retirement account
balances aren’t increasing fast enough to cover rising life expectancy, the
World Economic Forum warns in a report published
Thursday. The result could be workers outliving their savings by as much as a
decade or more.
“The size of the gap is such that it requires action” from
policymakers, employers and individuals, said report co-author Han Yik, head of
institutional investors at the World Economic Forum. Unless more is done, older
people will either need to get by on less or postpone retirement, he said. “You
either spend less or you make more.”
In the U.S., the forum calculates that 65-year-olds have enough
savings to cover just 9.7 years of retirement income. That leaves the average
American man with a gap of 8.3 years. Women, who live longer, face a 10.9-year
gap.
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.
The retirement savings gap is about 10 years for men in the U.K.,
Australia, Canada, and the Netherlands, the forum says. Longer-living women in
those countries face an extra two to three years of financial uncertainty.
Retirement
Savings Gap
Estimated
years of life expectancy past retirement savings, by country
Source:
World Economic Forum
Most of the world’s retirees are doing well compared with those in
Japan, where the retirement savings gap is 15 years for men and almost 20 years
for women.
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.
Across the world, governments and employers have pushed more
responsibility for retirement onto individuals, by shifting from traditional
pensions to defined contribution plans, mostly known as 401(k) plans in the
U.S.
“All the risks that governments and employers used to have, we’ve
shifted that onto workers,” Yik said.
The size of the world’s collective retirement savings gap could
exceed $400 trillion by 2050, up from $70 trillion in 2015, according to the
report. The U.S.’s savings gap will be the largest at $137 trillion, followed
by China at $119 trillion and India at $85 trillion.
Widening
Global Shortfall
Total
retirement savings gap by country
Source:
Mercer analysis for the World Economic Forum
Among the forum’s recommendations are making sure more workers are
covered by retirement plans on the job. Employers should be doing more to
improve investment options while pushing workers to save a sufficient amount of
their income, according to the report.
Fewer than half of the 1,900 retirement plans served by Vanguard
Group automatically enroll workers, according to the firm’s “How America Saves
2019” report released Tuesday.
That number has risen quickly, however, doubling to 48% last year from 24% in
2009.
https://www.bloomberg.com/news/articles/2019-06-13/world-s-retirees-risk-running-out-of-money-a-decade-before-death
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