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Are governments making promises about pensions that they might not be able to keep? Today’s infographic comes to us from Raconteur, and it illuminates a growing problem attached to an aging population (and those that will be supporting it).
The original infographic/article has been edited here for length (…) and clarity ([ ])
Since social security programs were initially developed, the circumstances around work and retirement have shifted considerably. Life expectancy has risen by three years per decade since the 1940s, and older people are having increasingly long life spans. With the retirement age hardly changing in most economies, this longevity means that people are spending longer not working without the savings to justify it.
This problem is amplified by the size of generations and fertility rates. The population of retirees globally is expected to grow from 1.5 billion to 2.1 billion between 2017-2050, while the number of workers for each retiree is expected to halve from eight to four over the same timeframe.
The WEF has made clear that the situation is not trivial, likening the scenario to “financial climate change”.
Like climate change, some of the early signs of this retirement savings gap can be “sandbagged” for the time being – but if not handled properly in the medium and long term, the adverse effects could be overwhelming.
While implementing various system reforms like raising the retirement age will help, ultimately the money in the system has to come from somewhere. Social security programs will need to cut benefits, increase taxes, or borrow from somewhere else in the government’s budget to make up for the coming shortfalls.
In the United States specifically, it is expected that the Social Security trust fund will run out by 2034. At that point, there will only be enough revenue coming in to pay out approximately 77% of benefits.
View a high resolution version of this graphic
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