Global Retirement Reality

The comments above & below is an edited and abridged synopsis of an article by John Mauldin

Mauldin sizes up the bull market in governmental promises. Meanwhile, keep an old trader’s slogan in mind: “That which cannot go on forever, won’t.” Or, an unsustainable trend must eventually stop.

Many US public pension funds are woefully underfunded and will never be able to pay workers the promised benefits, at least without dumping a huge and unwelcome bill on taxpayers. And since taxpayers are generally voters, it’s not at all clear they will pay that bill.

Readers outside the US might have felt smug and safe reading those stories. Generally speaking, Americans are not the thriftiest people on earth. However, if you live outside the US, your country may be more like the US than not. Mauldin looks at some data to illustrate the point, and in this article the focus is on Europe.

Mauldin discusses global shortfall; the UK time bomb; Swiss cheese retirement; and pay-as-you-go woes. We think people can spend 35–40 years working and saving, then stop working and go on for another 20–30–40 years at the same comfort level, but with a growing percentage of retirees and a shrinking number of workers paying into the system. That’s magical thinking, and it’s not what the original retirement schemes envisioned at all.

When Roosevelt created Social Security for people over 65 years old, US life expectancy was about 56 years. If the retirement age had kept up with the increase in life expectancy, the retirement age in the US would now be 82. Try and sell that to voters.

Worse, politicians have convinced the public that not only is a magical outcome possible, it is guaranteed. They are ignoring reality. They’ve made promises they aren’t able to keep and are letting others arrange their lives based on the assumption that the impossible will happen. It won’t.