22 October 2016
In Japan, there are 23 people aged 65 or over for every 100 working people. Photo: Bloomberg
In Japan, there are 23 people aged 65 or over for every 100 working people. Photo: Bloomberg

Will we have enough money for retirement?

As with death or serious illness, retirement is something for which everyone should prepare carefully.

More people are, in fact, making plans for their retirement, so fund management, wealth management and insurance companies should benefit from the aging of the population.

How can we save enough money for the years after we retire?

It is becoming increasingly important as life expectancy lengthens.

Several surveys in recent years showed that Americans are highly concerned about this issue.

So, companies that provide retirement plans or services are good investment targets.

As the Baby Boom generation enters retirement, the ratio of the retired population to the working population has been continuously increasing.

The elderly dependency ratio is the number of dependants 65 years old or above to every 100 working people.

In the past 50 years, the ratio has surged significantly and the trend will continue.

In Japan, the ratio is 23 percent. In 2050, it will climb to over 35 percent.

The rise in the dependency ratio will lead to a shortage of public funds, forcing everyone to make his or her own retirement arrangements to supplement the limited support from the government.

It is a challenge for many countries to keep their social security system sustainable.

Governments’ poor fiscal condition pushed up the debt levels of countries like Japan, the United States and European Union members.

Their public pension systems are under pressure.

So, if the government can persuade people to save more money, the financial pressure on public funds will be relieved to a certain extent.

Retirees are increasingly having to rely on themselves.

But people are very concerned about the gap between their savings and the amount of money needed to support themselves in retirement.

Insurer Aviva said in a study that every European needs to save an additional 2,000 euros (US$2,170) to 12,000 euros a year to fill the gap.

For these close to their retirement age, this could be a big challenge.

Solutions include delaying the retirement age or lowering people’s expectations for the amount of pensions they will get.

Obviously, more savings is necessary.

This article appeared in the Hong Kong Economic Journal on Nov. 4.

Translation by Myssie You

[Chinese version中文版]

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