NEW YORK (AP) -- A global retirement crisis is bearing down on workers of all ages.
Spawned years before the Great Recession and the 2008 financial meltdown, the crisis was significantly worsened by those twin traumas. It will play out for decades, and its consequences will be far-reaching.
Many people will be forced to work well past the traditional retirement age of 65. Living standards will fall and poverty rates will rise for the elderly in wealthy countries that built safety nets for seniors after World War II. In developing countries, people's rising expectations will be frustrated if governments can't afford retirement systems to replace the tradition of children caring for aging parents.
The problems are emerging as the generation born after World War II moves into retirement.
"The first wave of under-prepared workers is going to try to go into retirement and will find they can't afford to do so," says Norman Dreger, a retirement specialist with the consulting firm Mercer in Frankfurt, Germany.
The crisis is a convergence of three factors:
- Countries are slashing retirement benefits and raising the age to start collecting them. These countries are awash in debt since the recession hit. And they face a demographics disaster as retirees live longer and falling birth rates mean there will be fewer workers to support them.
- Companies have eliminated traditional pension plans that guaranteed employees a monthly check in retirement.
- Individuals spent freely and failed to save before the recession and saw much of their wealth disappear once it hit.
Those factors have been documented individually. What is less appreciated is their combined ferocity and global scope.
"Most countries are not ready to meet what is sure to be one of the defining challenges of the 21st century," the Center for Strategic and International Studies in Washington concludes.
Mikio Fukushima, who is 52 and lives in Tokyo, worries that he might need to move somewhere cheaper, maybe Malaysia, after age 70 to get by comfortably on income from his investments and a public pension of just $10,000 a year.
People like Fukushima who are fretting over their retirement prospects stand in contrast to many who are already retired. Many workers were recipients of generous corporate pensions and government benefits that had yet to be cut.
Jean-Pierre Bigand, 66, retired Sept. 1, in time to enjoy all the perks of a retirement system in France that's now in peril. Bigand lives in the countryside outside the city of Rouen in Normandy. He has a second home in Provence. He's just taken a vacation on Oleron Island off the Atlantic coast and is planning a five-week trip to Guadeloupe.
"Travel is our biggest expense," he says.
The notion of extended, leisurely retirements is relatively new. Germany established the world's first widely available state pension system in 1889. The United States introduced Social Security in 1935. In the prosperous years after World War II, governments expanded pensions. In addition, companies began to offer pensions that paid employees a guaranteed amount each month in retirement -- so-called defined-benefit pensions.
The average age at which men could retire with full government pension benefits fell from 64.3 years in 1949 to 62.4 years in 1999 in the relatively wealthy countries that belong to the Organization for Economic Cooperation and Development.
"That was the Golden Age," Mercer consultant Dreger says.
It would not last. As the 2000s dawned, governments -- and companies -- looked at actuarial tables and birth rates and realized they couldn't afford the pensions they'd promised.
The average man in 30 countries the OECD surveyed will live 19 years after retirement. That's up from 13 years in 1958, when many countries were devising their generous pension plans.
The OECD says the average retirement age would have to reach 66 or 67, from 63 now, to "maintain control of the cost of pensions" from longer lifespans.
Compounding the problem is that birth rates are falling just as the bulge of people born in developed countries after World War II retires.