According to the article "Global Pension Timebomb: Funding Gap Set to Dwarf World GDP" recently published in the World Economic Forum, the world’s six largest pension systems (U.S, UK, Japan, Netherlands, Canada, and Australia) are expected to have a joint shortfall of $224 trillion by 2050, setting the world up for the biggest pension crises in history. Subsequently, the anticipated increase in longevity and ageing populations has been coined the "financial equivalent of climate change". We have to face this problem head on, and acknowledge that this is an issue that will affect our children and future generations.
There are five high priority actions that governments and policy makers should take to adapt pension systems to address the challenges:
1) Review normal retirement age to increase in line with life expectancies
2) Support financial literacy efforts starting in schools and targeting vulnerable groups
3) Provide clear communication on the objective of each pillar of national pension systems and the benefits that will be provided
4) Aggregate and standardize pension data to give citizens a full picture of their financial position
5) Make saving easy for everyone
Governments, as well as policy makers, have an important role to play in reforming pension systems in societies where living to as old as 100 is becoming increasingly more common. However, the question is what can we do? Well, more and more we see a need for retirement planning as facts like these come to light, for efficient and effective approaches to make us more prepared as future retirees. Planning ahead to save and knowing exactly how much money you will have in retirement, instead of depending on a government pension which may or may not materialize will give you peace of mind, as well as prepare you for what may lie ahead.
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