Future Friday: Retirement is considered in danger

Megatrends are endangering retirement possibilities around the world.

According to a worldwide survey, the majority of current workers and retirees think future retirees are going to be in bad shape. In The New Social Contract: A Blueprint for Retirement in the 21st Century, which is based on a 2018 survey of 16,000 workers and retirees in 15 countries spanning the Americas, Europe, Asia, and Australia, developing world-wide megatrends are responsible for putting retirement in danger.


The megatrends that the Transamerica Center for Retirement Studies and the Instituto de Longevidade Mongeral Aegon, which is based in Brazil, see include:

  • Reductions in government benefits (38 percent global, 26 percent U.S.)
  • Increased life expectancy (27 percent global, 25 percent U.S.)
  • Volatility in financial markets follows (24 percent global, 22 percent U.S.)
  • Changes in labor markets (21 percent global, 14 percent U.S.)
  • Prolonged low interest rate environment (20 percent global, 14 percent U.S.)

Catherine Collinson, CEO, and president of the Transamerica Institute and Transamerica Center for Retirement Studies said: “Megatrends are disrupting long-standing societal constructs, including how people live and work, plan for their future and, ultimately, prepare for their retirement.”

Crumbling social contract

The study found that there are a number of factors involved in this dissolution of the social contract that many countries have around the world. These include:

  • Employer-sponsored retirement benefits are vital in helping people financially prepare for retirement. However, only 43 percent of workers globally (57 percent U.S.) say their employer offers them a retirement plan that includes an employer contribution.
  • Just 39 percent of workers globally are “habitual savers” who always make sure they are saving for retirement (55 percent U.S.).
  • Only 25 percent of workers globally believe that they are on course to achieve their expected retirement income needs (32 percent U.S.).

The good news in this data is that the U.S. is finally ahead in an international survey.

Who is responsible?

There is an ongoing debate of who bears the responsibility for an employee’s retirement. Is it the responsibility of the individual to save for retirement? Is it the employer that is responsible? Or is it the responsibility of the government of each country. The answer to those questions is a resounding YES! However, there are problems with that answer. As the figures above show, fewer than a third of employees save for retirement. People as a whole don’t take a longer-term view of future needs. Part of that is due to people not employed in good paying jobs, but it is also a bigger story of people just not saving. There are ample stories of people around the world becoming well-to-do on jobs that paid pennies.
The employment contract today is changing, as workers don’t stay with one employer anymore. There is no “lifetime” employment. Thus saving for the future when you work for multiple companies becomes more difficult.
Governments have to bear the burden if people don’t save. And citizens also feel the government should bear that burden. According to the study, “Only seven percent of workers and retirees globally feel that the government should do nothing to address the cost of social security, believing it will remain perfectly affordable in the future (9 percent U.S.).”

What is the solution?

To help prepare future workers for retirement, to preserve the social contract, to preserve peace, and to ensure countries, companies, and individuals can continue to work together it is going to take a lot of cooperation. Is that possible? Only the future will tell.

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