Demographics

The Pension Time Bomb: $400 Trillion by 2050

Published

5 years ago

April 16, 2018

Jeff Desjardins

View a high resolution version of this graphic

The Pension Time Bomb: $400 Trillion by 2050

View the high resolution version of today’s graphic by clicking here.

Are governments making promises about pensions that they might not be able to keep?

According to an analysis by the World Economic Forum (WEF), there was a combined retirement savings gap in excess of $70 trillion in 2015, spread between eight major economies..

The WEF says the deficit is growing by $28 billion every 24 hours – and if nothing is done to slow the growth rate, the deficit will reach $400 trillion by 2050, or about five times the size of the global economy today.

The group of economies studied: Canada, Australia, Netherlands, Japan, India, China, the United Kingdom, and the United States.

Mind the Gap

Today’s infographic comes to us from Raconteur, and it illuminates a growing problem attached to an aging population (and those that will be supporting it).

Since social security programs were initially developed, the circumstances around work and retirement have shifted considerably. Life expectancy has risen by three years per decade since the 1940s, and older people are having increasingly long life spans. With the retirement age hardly changing in most economies, this longevity means that people are spending longer not working without the savings to justify it.

This problem is amplified by the size of generations and fertility rates. The population of retirees globally is expected to grow from 1.5 billion to 2.1 billion between 2017-2050, while the number of workers for each retiree is expected to halve from eight to four over the same timeframe.

The WEF has made clear that the situation is not trivial, likening the scenario to “financial climate change”:

The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change

Michael Drexler, Head of Financial and Infrastructure Systems, WEF

Like climate change, some of the early signs of this retirement savings gap can be “sandbagged” for the time being – but if not handled properly in the medium and long term, the adverse effects could be overwhelming.

Future Proofing

While implementing various system reforms like raising the retirement age will help, ultimately the money in the system has to come from somewhere. Social security programs will need to cut benefits, increase taxes, or borrow from somewhere else in the government’s budget to make up for the coming shortfalls.

In the United States specifically, it is expected that the Social Security trust fund will run out by 2034. At that point, there will only be enough revenue coming in to pay out approximately 77% of benefits.

Related Topics:social security pensions governments gap saving retirement

Up Next

How Many U.S. Dollar Bills Are There in Circulation?

Don't Miss

Where the World’s Ultra Rich Population Lives

Click for Comments

Money

Charted: Retirement Age by Country

We chart current and effective retirement ages for 45 countries, revealing some stark regional differences.

Published

21 hours ago

October 2, 2023

Rida Khan

Charted: Retirement Age by Country

The retirement landscape can look completely different depending on what country you’re in. And charting the retirement age by country reveals a lot of differences in the the makeup of a labor force, both for economic and cultural reasons.

This graphic delves into the current and effective retirement ages across 45 nations in 2020, based on comprehensive data from the OECD 2021 report.

Defining Retirement Ages

Before we dive into the numbers, let’s clarify the measurements used by the Organisation for Economic Co-operation and Development (OECD):

The current retirement age is the age at which individuals can retire without penalty to pension after completing a full career starting from age 22.
The effective retirement age refers to the average age of exit from the labor force for workers aged 40 years or more.

Many countries have seen workers effectively retire earlier or later than the current retirement age. This variance can arise due to a multitude in factors including differences in career start ages, some industries offering earlier retirements or benefits for later commitments, or countries facilitating different workforce exits due to market demands and policies.

Some people also choose to retire early due to personal reasons or a lack of available work, receiving a smaller pension or in some cases forgoing it entirely. Likewise, some people choose to stay employed if they are able to find work.

Retirement Age by Country in 2020

Here’s a snapshot of the current and effective retirement ages by country in 2020:

Country	Retirement age (Current)	Retirement age (Effective)	Retirement age (Women, Effective)
🇦🇹 Austria	65	62	61
🇧🇪 Belgium	65	61	60
🇨🇦 Canada	65	64	63
🇨🇱 Chile	65	65	61
🇨🇴 Colombia	62	67	60
🇨🇷 Costa Rica	62	67	62
🇨🇿 Czech Republic	64	63	62
🇩🇰 Denmark	66	64	N/A
🇪🇪 Estonia	64	64	65
🇫🇮 Finland	65	63	64
🇫🇷 France	65	60	61
🇩🇪 Germany	66	63	N/A
🇬🇷 Greece	62	61	58
🇭🇺 Hungary	65	62	60
🇮🇸 Iceland	67	66	64
🇮🇪 Ireland	66	64	N/A
🇮🇱 Israel	67	65	N/A
🇮🇹 Italy	62	62	61
🇯🇵 Japan	65	68	67
🇰🇷 Korea, Republic of	62	66	65
🇱🇻 Latvia	64	66	65
🇱🇹 Lithuania	64	63	N/A
🇱🇺 Luxembourg	62	59	60
🇲🇽 Mexico	65	66	63
🇳🇱 Netherlands	66	64	63
🇳🇿 New Zealand	65	68	66
🇳🇴 Norway	67	65	63
🇵🇱 Poland	65	62	60
🇵🇹 Portugal	65	65	63
🇸🇰 Slovakia	63	60	N/A
🇸🇮 Slovenia	62	62	61
🇪🇸 Spain	65	61	60
🇸🇪 Sweden	65	66	65
🇨🇭 Switzerland	65	65	64
🇹🇷 Türkiye	52	61	59
🇬🇧 United Kingdom	66	64	63
🇺🇸 United States	66	65	N/A
🇪🇺 European Union (Average)	64	63	N/A
🇦🇷 Argentina	65	62	63
🇧🇷 Brazil	62	62	59
🇨🇳 China (People's Republic of)	60	66	61
🇮🇳 India	58	67	N/A
🇮🇩 Indonesia	57	69	N/A
🇷🇺 Russia	62	62	60
🇸🇦 Saudi Arabia	47	59	N/A
🇿🇦 South Africa	60	60	56

Three countries had the highest current retirement age at 67 years, Iceland, Israel, and Norway, but all had slightly lower effective retirement ages on average. On the flip side, Saudi Arabia had the lowest current retirement age at only 47 years with full pension benefits. Only Türkiye at 52 years was close, and notably both had much higher effective retirement ages on average.

Discrepancies between different regions are clear across the board. Many Asian countries including China, India, and South Korea have official minimum retirement ages in the early 60s and late 50s, but see workers stay in the workforce well into their late 60s. Meanwhile, most European countries as well as the U.S. and Canada have more workers retire earlier than minimum retirement ages on average.

Almost all of the countries with measured effective retirement ages for women also saw them exit the workforce earlier than men. This can be the result of cultural gender norms, labor force participation rates, and even the setup of pension systems in different countries.

The five exceptions in the dataset where women retired later than men? Argentina, Estonia, Finland, France, and Luxembourg.

Looking to the Future

In 2023, France sparked controversy by raising its early retirement age by two years. This decision triggered widespread strikes and riots and ignited debates about the balance between economic sustainability and individual well-being.

Given aging demographics in many developed countries and a continued need for labor, this isn’t expected to be the only country to reassess retirement. The OECD projects a two-year increase in the average effective retirement age by the mid-2060s.