Saturday , 20 October 2018


The Pension Time Bomb

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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
The Pension Time Bomb: $400 Trillion by 2050

Related Articles From the munKNEE Vault:

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Calpers, the nation’s largest pension fund, recently reported a $139 billion shortfall – but is the actual shortfall more likely to be $500 billion to $1 trillion when we adjust their investment assumptions – that ignore how the Federal Reserve has changed the markets – for our current reality. If so, then there is an explosive increase in pension obligations – and taxpayer obligations – that greatly exceed what is being reported by the governments or in the media.

2. The Day of Gold-Plated Public Sector Pensions are Numbered

The ‘workforce elite’ in America today are public sector employees and they, led by state and municipal unionized workers, are now in open revolt to preserve their special status, and the status quo. Wisconsin is the current case study in what happens when the government, a monopoly service provider, confronts the fact that the taxpayer is tapped out and can’t take it anymore – and there simply isn’t enough money anymore. Those realities are going to result in major adjustments in worker incomes, future pensions and benefits and their overall standard of living. Let me explain. Words: 2137

3. When the Stock Market Inevitably Crashes, It Will Wipe Out Pensions! Got Gold?

Pensions are run like Ponzi schemes; as long as the cash coming in to the fund is equal to or exceeds beneficiary payouts, the scheme can continue but it’s a catastrophe when economic conditions deteriorate and tax revenue flattens or declines, as is occurring now. When the stock market inevitably cracks, it will wipe pensions out.

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