LTC Bullet:  The Global Retirement Crisis

Tuesday, July 2, 2002

Los Angeles, California--

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LTC BULLET: THE GLOBAL RETIREMENT CRISIS

LTC Comment: The threat of terrorism and homeland security absorb most of today's political attention. Unfortunately, America's twin towers of vulnerability in the future may be retirement and health security for an aging baby-boom generation. Luckily, the Center for Strategic and International Studies (CSIS), a private, nonpartisan think tank in Washington, DC, has its eye on both threats. We're very pleased to bring a new CSIS publication to your attention. 

The author is Richard Jackson, whose work with the Concord Coalition and Pete Peterson (Gray Dawn and Will America Grow Up Before it Grows Old?) has done so much already to highlight the challenge of global aging. CitiGroup provided funding for the project. Here's the bibliographic citation followed by a hyperlink to the 93-page report and a short quote as synopsis. Richard Jackson, The Global Retirement Crisis: The Threat to World Stability and What to Do About It, The Center for Strategic and International Studies, Washington, DC, 2002. http://www.csis.org/gai/global_retirement.pdf

Hard copies of the publication may be obtained from CSIS for $20 shipping and handling. Email Craig Romm at mailto:CRomm@csis.org. For more information on CSIS, see http://www.csis.org/. Go to http://www.csis.org/GAI for background on the CSIS Global Aging Initiative (GAI), which "explores the international economic, financial, political, and security implications of aging and depopulation-a global phenomenon that is occurring first in the advanced industrial and former East Bloc nations, but after 2020 will also overtake much of East and Southeast Asia and Latin America. Global aging will soon be recognized as one of the most influential developments of the 21st century."

Introduction to The Global Retirement Crisis: The Threat to World Stability and What to Do About It:

"The aging of the world's population will strain the capacity of societies to care for the old without sacrificing the living standards of the young. In the developed world, where workers typically support retirees through 'pay-as-you-go' retirement systems, the rising cost of pensions and health benefits threatens fiscal and economic stability. Yet even in the developing world, where the old typically live with the young, falling birthrates and growing life spans are combining with industrialization and urbanization to create new stresses. Almost everywhere, countries will have to race against time to ensure their social fabric against the 'shock' of global aging. 

"The United States is better positioned to confront the challenge than most of the world's major economies. It is now the youngest of the developed countries-and its relatively high rates of fertility and immigration are likely to keep it so. By 2050, the elderly share of the population will reach 27 percent in France, 31 percent in Germany, and 36 percent in Japan. In the United States, it will only reach 21 percent. 

"Along with its younger population, the United States has a relatively inexpensive Social Security system, relatively high retirement ages, and a large and innovative private pension system. A larger share of the elderly and near-elderly work in the United States than in any major developed country except Japan. As of 1999, US pension plans possessed an astonishing 59 percent of total pension assets worldwide. 

"Although these are considerable advantages, they are not a cause for complacency. The US Social Security system faces a widening financing gap when Boomers start retiring a decade from now. Despite Americans' traditions of financial self reliance, most are heavily dependent on Social Security-and vulnerable to benefit cuts. Although US pension plans own 59 percent of all global pension assets, half of the workforce has no private pension coverage at all. America also has the most costly health-care system in the world. In 1998, the United States spent $4,178 per capita on health care; Switzerland, the next runner-up, spent just $2,794. Explosive growth in health-care spending on the elderly threatens to cancel out the US advantage in pensions.

"A few years ago, America began a much-needed debate over the aging challenge. The Clinton administration proposed using mounting budget surpluses as a means of bridging Social Security's financing gap. The Bush administration proposed using them to fund a transition to a two-tiered system that would include personal accounts. By the time President Bush's Social Security Reform Commission issued its final report in December 2001, however, its recommendations were overshadowed by other events. 

"In the aftermath of September 11, the budget surpluses have vanished-and so has the enthusiasm for reform. Before long, however, America will be compelled to re-engage the aging challenge. In today's more constrained fiscal and economic environment, the reform of retirement systems has become more important, not less."