Friday, February 2, 2018

Friday Feature Book Review: Falling Short (in retirement) by Charles D. Ellis チャールズD.エリス: 老後資金がショートする

More than 30 years ago, a major change to the US retirement system began. At that time, 401(k) programs began. This has changed how many US citizens view retirement, but the recent reasons for retirement are now impacting this change. How did this all begin, and how can we find our way out of this unclear future?

This book clearly explains how the future of US citizens will need to adjust to only "possible" future retirement plans. Many similar economies in Europe, Africa, Brazil, Japan, Canada and China are all looking at similar economic trends with pension allocations. Assumptions need to change soon, and action needs to be taken today, in order to provide for tomorrow.

Today, the average US citizen retires at age 64 for men, and age 62 for women. However, the average retired citizen will continue to live on for around 21 years for men, and 23 years for women, so age 85. The average citizen will live for a much longer period than any pension planning is now expecting. Any cashflow is a hard reality, and now need a rethink. Any change will not be popular with the current population.

If the average US citizen has only US$111,000 saved within retirement savings. That is just $400 a month spread over 23 years, and that number does not bode well for the future. Inflation and medical care will make that figure seem lacking. The biggest change the author tries to suggest is raising the new retirement age from 65 to 70. A nice first step, but it is hardly a final guide for long term senior living prosperity. Working at least part-time after age 60, may be a financial reality for many future retirees going forward.

How did pensions get it so wrong for so many? Almost 200+ years ago, the world's first pensions began in Europe, and were started by Napoleon Bonaparte. He started a military veterans pension for his soldiers. At that time, the average French citizen lived until age 55, so by starting any pension age at age 65, it built a 10 year cushion, and was very sustainable. Soon other parts of the government offered similar pensions to other citizens. The military & veteran origins of these government pensions were soon forgotten.

Later, the private sector followed suit and the whole concept of a military or veteran connection was lost completely. The quality of life was able to rise in France, and the rest of Europe, but the retirement age was never touched. This inability to adjust the retirement age has created a difficult to sustain system today.

The Top 3 Takeaways from this book that impact any reader are:

1) The first pension in Europe, was offered at start at age 65, when the average lifetime was only 55 years of age. This built a 10 year cushion, or margin of safety for the system overall.
2) The very first pension was in fact a military veteran disability pension, and the went into wider adoption.
3) New changes will have to reflect the life cycle of a longer life until age 85. A delayed start or partial start may need to be put in place.

This is a focused book, that really tries to bring ideas to a system in need of change. If thinking about bigger picture solutions turns you on, then this is a very inspiring starting point for a worldwide challenge for all citizens. Given where worker skills need to change with a future full of AI and many other possible changes to retirement lifestyles. It provides some solutions but is only a starting point. Many more ideas need to be reviewed and considered for the pension aged members of many societies. It is an economic puzzle that needs to be fixed. The sooner the better for us all. Highly Recommended!

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