Japan’s economy has been in trouble for a long time. Low, or no, growth for decades, and a demographic time-bomb that is about to go off, are two of the many problems Japan faces. Japan simply can’t afford to pay its retirees what they’ll need to survive, so the country’s Financial Services Agency is recommending that retirees save more on their own. Akane Otani explains in The Wall Street Journal:
Japan already is feeling the pinch: The national pension fund hasn’t grown rapidly enough to keep up with a rapid rise in the elderly population. As a result, the country’s Financial Services Agency released a report in June warning that a typical couple would have to save at least $185,000—in addition to whatever they contributed to their pension over their lifetime—to sustain themselves after retiring. That has troubling implications for a country where, according to the Ministry of Health, Labor and Welfare, more than half of retirees live on pension payouts alone.
In the U.S., a similar problem is developing for state and local governments trying to deliver on promised benefits for retired workers. Public pension funds often can’t deliver returns at the pace that they need to fund future payouts for retirees, and many managers of such funds have had to lower their predictions of what they will be able to earn in future years. That is forcing governments to turn to unpalatable measures to stave off a shortfall in funding, such as venturing into riskier investments including commodities, private equity or real estate. Some analysts worry those could backfire in a downturn.
Read more here.
You’ve been reading here about the risk to public pensions in the United States for years. Here’s a sample of the trouble Americans relying on public pensions face every day:
- Pensions, Unsurprisingly, Miss Their Mark
- New Jersey Taking Small Steps to Pension Reform. Is it too Little too Late?
- Illinois: New Governor, Same Old Pension Pyramid Scheme
- Underfunded Pensions and a Devil’s Bargain
- California Pensions Continue to Make Headlines
- Pensions are Still Hiding from the Truth
If you’re relying on a public pension for your retirement, you may want to take the advice of Japan’s Financial Services Agency, and save more on your own.
E.J. Smith - Your Survival Guy
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