Charting Retirement
Security
In an Era of
Uncertainty

The Economic Climate
• Low interest rate environment
• Market returns up/down, stable?
• Economy weak, some regions hit harder
than others (eg. Detroit, NY, CA); some
countries too.
• Glimmers of hope as ‘clean up’ continues

Impact on Retirement
Funds
• Losses in both DC and DB plan $4 trillion
between Oct 2007 to Oct 2008 with the pain
shared about equally.
• Those with DC plans experienced a loss of
wealth, confidence, and security.
• DB plan beneficiaries, more a loss of security,
questions of confidence in future.

Implications
• The fundamentals still apply.
• Finding alternatives to minimize loss,
depending when retirement date approaches.
• Exposed financial vulnerabilities; markets not
invincible and financial innovation no
superhero.
• Need to view options with new set of lenses,
ie., framing of accumulation and decumulation
stages.
• Need awareness of market risk vs. longevity
risk.

Demographic Changes
• Populations are aging in developed world
(China and Russia too)
• Oldest region is Europe (Italy, Germany
oldest)
• Globally, 1 in 14 is 65 years +; by 2050, 1 in 6
(Japan is 1 in 5)
• Oldest-old 80 years +, fastest-growing
population, to increase four-fold (UN
projections ’06)

Generational Changes
US Generations
Baby Boomers Gen X
• Numbers by Gen Y
generation US 0 20 40 60 80
(approximates)
• Individual states’
worker-elderly ratios Millions
will vary due to
migration, minority
influences

Pressure Points
• Asset prices
• Assets prices are expected to decline as savers
cash in their portfolios.
• The downward trend of real interest rates and
equity yields of developed countries (OECD)
could flatten and reverse; the opposite is true
for younger societies (India, Latin America).
• Professor Siegel of Wharton says it will take
massive investment by people in India, China and
other developing countries to prevent a US
market meltdown.
• But microtrends impact markets, economies.

Pressure Points
• Economy
• If workplace participation rates stay the same
(with same retirement age incentives), GDP
growth declines to 1.7% annually over three
decades (OECD).
• In business as usual mode, massive burden on
workers with similar pressures on publicly funded
healthcare and pensions.
• Will need new workplace policies and incentives.

Economic Activity Rate % of 60-64 year-olds
100
75
50
25
0
Germany Japan US UK
1950 2000

Finding the Balance
• Obama
administration
policy
• Getting more
realistic about
promises in HC and
SS
• Need for
transparency about
funds available and
• Tipping points around the globe, ability to pay
e.g., Netherlands, Japan, Poland

Retirement Security
in the Future
• More fashioned by individual knowledge
with greater access to information and
education, but better due diligence will be
required
• A civil approach with transparency and
personal responsibility the foundation
• Understanding of how to control one’s
personal retirement security infrastructure