Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Retirement Security

793 views

Published on

Sample. Forces impacting retirement security, economics, demographics, etc.

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

Retirement Security

  1. 1. Charting Retirement Security In an Era of Uncertainty
  2. 2. 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
  3. 3. 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.
  4. 4. 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.
  5. 5. 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)
  6. 6. 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
  7. 7. 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.
  8. 8. 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.
  9. 9. Economic Activity Rate % of 60-64 year-olds 100 75 50 25 0 Germany Japan US UK 1950 2000
  10. 10. 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
  11. 11. 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

×