A looming retirement crisis is threatening to make it very difficult for millions, and perhaps billions, of people to retire comfortably.
A study from the World Economic Forum says by the year 2050, shortfall worldwide will reach $400 trillion in overall retirement savings.
That figure is said to be roughly five times the size of the current global economy.
The report, however, observes that only about a quarter of the issue is due to a lack of individual savings. The remaining 75 percent is rooted in the fact that public and private pensions are unfunded.
The report looks at the current and expected (by 2050) shortfalls in eight leading countries, including the United States.
The other countries are, Australia, Canada, China, India, Japan, the Netherlands and the United Kingdom.
The report shows that Australia has a $1 trillion retirement savings gap, but the gap could total $9 trillion by 2050.
As of 2015, Canada’s retirement savings gap adds up to $3 trillion. But, like Australia, it is expected to grow by 5 percent annually. So, by 2050, Canada is looking at a shortfall of $13 trillion.
For China, the report says, as of 2015, it is facing a shortfall of $11 trillion, which is expected to grow by 7 percent annually. And by 2050, China is looking at an enormous gap of $119 trillion.
The report, however, observes that China is still a developing economy and some strategic planning for the country’s roughly 1.4 billion people could go a long way.
The report says, though, India is only facing a retirement shortfall of $3 trillion as of 2015, its problems are set to grow faster than any other country on the list.
It estimates a 10 percent annual growth in the savings gap, which means India’s gulf is expected to grow to $85 trillion by 2050.
According to the report, the Japanese are expected to see their retirement savings gap grow at the slowest rate of any other country, putting it at 2 percent annually.
It puts the gap for Japan at $11 trillion, as of 2015. It is expected to rise to $26 trillion by 2050.
The Netherlands only has a $2 trillion retirement and pension savings gap, which is estimated to rise to $6 trillion by 2050
The U.K. with a total population of more than 65 million, has a 2015 gap of $8 trillion, with an assumed 4 percent annual growth. Its retirement savings will be $33 trillion short by 2050.
The U.S. is looking at the biggest retirement savings gap, by 2050, in the world, according to the report. Right now, the U.S. is looking at a pension and savings shortfall of $28 trillion.
And with the World Economic Forum predicting an annual growth rate of 5 percent, that will, ultimately, result in the gap swelling to $137 trillion by 2050.
The report fears the development could have very real global implications for everyone, specifically for young people today.
It further notes that by 2050, retiring won’t be as smooth of a process as it is today.
It, however, proffers one or two ways individuals can minimise the impact.
“The simplest and easiest way to get started is to begin padding your savings when you’re young. Interest rates can and will do wonders. So start tossing money into a savings account as soon as possible. You can and should be sticking to a budget and controlling your spending, as well as trying to increase your income by getting a better job or raise.”
“Just a little bit of effort now will pay off in spades down the road. But you need to have some foresight — something millions of people evidently didn’t have over the past several decades,” it concludes.
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