Most people approaching retirement have two vital questions to answer – when can they give up work and will they have enough money to pay for a comfortable retirement?
The problem is no one knows because predicting the date of death is impossible.
Think tank the World Economic Forum has looked at the questions and reveals five reasons why many workers may not have saved enough for their retirement.
Top of the list is a simple discovery – technology and diet is helping people live much longer than the lifespan pension systems were designed to cope with.
By 2050, the forum estimates the pensions gap – the difference between how much pension funds have invested and the amount they are liable to pay – will hit $224 trillion for the six leading pension nations.
And this almost doubles if China and India are added to the mix.
USA has largest deficit
The biggest pension black hole is in the USA, which is $28 trillion in the red now and is expected to sink another $109 trillion into the mire by 2050.
The UK is $8 trillion in the red now, and expects to sink to $38 trillion by 2050.
The other leading pension systems are in Australia, Canada, Japan, and the Netherlands.
“Retirement age for most of these countries is 65, with Japan the exception, at age 60,” says the report We’ll Live to 100 – How Can We Afford It?
“Looking at life expectancy in 2015, we can see that pensioners are now living eight to 11 years longer – and in the case of Japan, a whopping 16 years longer.
Spending is a problem, too
“That means that pension systems are now having to pay benefits for two to three times longer than what they were designed for.”
The report goes on to explain that calculating how much money is needed for retirement is difficult.
One common assumption is that we will need less money in retirement than we do while we are working,” says the report.
“There are three main sources of income during retirement: government sponsored pensions, work or occupational pension plans, and personal savings.
“Because we are living so much longer these days, there is a gap between what we need during retirement and what we have available, even among countries with developed pension systems.”