A massive retirement shortfall is developing — and it is a much bigger problem than your own possible lack of sufficient retirement assets.
If you are lucky, your retirement savings can be measured with 6 zeros — meaning you a millionaire and probably well prepared for retirement. However, most of us measure our retirement savings with 5 zeros ($100,000 – $900,000) and may or may not be able to make retirement work at our desired lifestyle.
So, that means that most of us are probably around 1 zero short of a truly secure retirement. Do you know what that adds up to in aggregate — around the world?
The global retirement shortfall equals $400 trillion — $400,000,000,000,000. That is 14 zeros — a number that is 5 times bigger than the global economy. And you thought you were stressed about running out of money!
Yes. And, yes, that is a very big number.
A new report from the World Economic Forum has found that longer life spans and disappointing global investment returns will indeed create a $400 trillion retirement shortfall in the next 30 years.
That means that the world needs $400 trillion more than we are projected to have to fund retirement by 2050.
The shortfall is calculated by assessing the difference between the amount of money governments, employers and individuals will have for retirement versus what is needed to fund income equal to 70% of each individual’s pre-retirement earnings.
About 1/4 of the shortfall — $100 trillion — belongs to the United States. About another $100 trillion belongs to China. India, Japan, the United Kingdom, Canada, Australia and the Netherlands are others that have significant retirement deficits.
The fear of running out of money in retirement is the biggest fear most of us have about retirement.
And while much of the overall retirement shortfall belongs to underfunded government and private pensions, a big problem is that individuals simply have not saved enough.
To find out if you are going to run out of money in retirement, use the NewRetirement retirement planner. It is easy to get started. Enter some initial information about your finances and immediately see when you might run out of money — for both pessimistic and optimistic scenarios. Keep adding more details for a more accurate forecast of your financial future.
This retirement planner is one of the the most comprehensive and powerful tools available. Forbes Magazine calls the system “a new approach to retirement planning” and it was named a best retirement calculator by the American Association of Individual Investors (AAII) and CanIRetireYet.
Don’t despair if it appears that you have not quite saved enough. You actually have quite a few options for tweaking your finances to insure that you don’t run out of money.
Working a bit longer, having a retirement job (part time or full time), delaying the start of Social Security, reducing expenses, downsizing, optimizing your investment strategy and tapping into your home equity are all achievable fixes to the problem of inadequate savings.
Want to see for yourself? You can run various “what if” scenarios in the NewRetirement retirement planning calculator. Once you have set up your current information, you can start making changes and discover what will really make a difference for you.
Every time you update your data, you’ll get detailed feedback about how your out of money age, cash flow, estate and net worth change. You will discover ways to improve your finances and feel better about your future.
While not always politically popular, governments can increase the target retirement age.
Additionally, governments and businesses probably need to do more to encourage retirement planning by individuals. More education and institutional savings plans could help mitigate this huge global financial liability.
