Why and how people will not get their retirement money
History of retirement
Today in many countries retirement is a social security benefit from the government where people can stop to work due to bad health or due to old age. Pension though wasn't even imagined for one and half century ago and Germany was the first country to introduce retirement benefits just in 1889 [1]. So what was before that? How people secured their lives when they become older?
Is death inevitable or it is just a disease?
Many breakthroughs has been already made in different fields from curing death threatening diseases; stopping old aging and even more important is extending life expectancy far beyond to immortality. No doubts is still more to do in order to accomplish such an unbelievable goal and still many serious people in the bio-engineering field say that this goal the humans will reach by year 2050.Alright so what extending life expectancy or never die status have to do with the pension?
The question is not so easy as it appeared to be and the consequences are enormous.
Let's take for example Greece where life expectancy in average for humans has grown only in last 60 years with 12 years but retirement age has been very low and didn't change so much during this growing in age population. By fact the retirement was possible from as early as the age of 55 after 30 years of work, many had extra perks: public sector employees could retire as early as 52, some women with young children could retire with a reduced pension at 50 [2]. The course of low retirement age was one of reasons why Greece almost went bankruptcy in 2015. To adjust and fill the pension fonds, the retirement age should be increased. To avoid collapse Greece did exactly that, they changed standard retirement age from 55 years to 67 years, so they added more 12 years, precisely with the same age as life expectancy increased.
So far so good, now we understand what causes rise of retirement age and let's look how this will change in coming years. With new inventions and curing death treating diseases the life expectancy will grow too. For an abstract example we can assume that humans will get the ability to stop aging, to compensate this disruptive effect on pension fonds it is necessary to increase retirement age as well. One outcome could suggest that people will work even more years to reach until retirement, the second and most likely outcome is completely dissolving and shutting down retirement benefit.
[3]The pension fonds today works very different from how it was in the first years when it was lanched. From the beginning it was you who have to work pay taxes and then you use your own money from some bank account when you get retired. However now you have to work pay taxes and your money don't stay in some fond waiting for you until you will retire instead your money goes to pay pension to people who already are retired. The system became extremely vulnerable when deficit in pension fond was balanced with money from the future generations of employees. There is one thing the ruling economists didn't thought would happen, decrease in birth rates. So if less children are born then less of them become employees and less of employees mean less taxes that goes to the pension fond. Obvious that this deficit affecting pension fond even further and government have to take measure. What they do? Increase taxes for employers and employees and cut the retirement of course, so people end to earn less money and when they go on retirement they can't pay their bills on that wretched benefit. Pension crisis is a global problem and most of the countries will face difficulties to stand for the values of the modern retirement. Awareness is rising in different serious publications and by well known economists but this is not enough to avoid another economic meltdown. There is many proposes how to confront this issue but none of them is good and secure as private saving. There is another question: alright I will do my best to save private as much as possible, but why should I pay taxes for such unreliable system that force me to save private?
Collapse of the pension system
[3]The pension fonds today works very different from how it was in the first years when it was lanched. From the beginning it was you who have to work pay taxes and then you use your own money from some bank account when you get retired. However now you have to work pay taxes and your money don't stay in some fond waiting for you until you will retire instead your money goes to pay pension to people who already are retired. The system became extremely vulnerable when deficit in pension fond was balanced with money from the future generations of employees. There is one thing the ruling economists didn't thought would happen, decrease in birth rates. So if less children are born then less of them become employees and less of employees mean less taxes that goes to the pension fond. Obvious that this deficit affecting pension fond even further and government have to take measure. What they do? Increase taxes for employers and employees and cut the retirement of course, so people end to earn less money and when they go on retirement they can't pay their bills on that wretched benefit. Pension crisis is a global problem and most of the countries will face difficulties to stand for the values of the modern retirement. Awareness is rising in different serious publications and by well known economists but this is not enough to avoid another economic meltdown. There is many proposes how to confront this issue but none of them is good and secure as private saving. There is another question: alright I will do my best to save private as much as possible, but why should I pay taxes for such unreliable system that force me to save private? Notes
[1]. "The German Precedent" http://www.ssa.gov/history/age65.html
[2]. "They stole my money: Greek dreams of retirement turn sour" by Elena Becatoros http://www.ekathimerini.com
[3]. "U.S. Pension Fund Collapse Isn't a Distant Prospect. It Could Come in 5 Years" by Aaron Brown www.bloomberg.com
[3]. "U.S. Pension Fund Collapse Isn't a Distant Prospect. It Could Come in 5 Years" by Aaron Brown www.bloomberg.com
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