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Please mind the (retirement savings) gap

When I was a junior in college, I studied in England for 6 months so I became familiar with the subway reminder of "please mind the gap." It seems so courteous and there doesn't really seem to be much danger in the tiny gap between the subway car and the platform but it is nice to be reminded to keep safe. Unfortunately, there is a huge gap emerging in retirement savings and the it is more of a chasm than a gap. According to the World Economic Forum, longer life spans and disappointing investment returns will help create a $400 trillion retirement savings shortfall by 2050, a figure more than five times the size of the global economy today. Needless to say, this is a monumental problem that needs to be addressed.

Over the years, employers have shifted away from pensions and offered defined-contribution plans like 401(k) and individual retirement accounts which now make up more than 50% of global retirement assets. This puts the burden of retirement largely on individuals so it is up to you to ensure your retirement.

Because of advancements in medicine, people are living longer. Life expectancy has risen on average by about a year every five years since the middle of the last century. Half of babies born in the US in 2007 may live to 104 according the forum report.

Individuals need to empower themselves

Given the current system, individuals need to empower themselves to ensure a good retirement. It is important to start stashing as much money into 401k accounts as possible and never pass up on a company match. We also recommend having a plan and update it on a regular basis. This may mean working with a financial planner who can look at your expenses and assets and give you an estimate if you are on the right track and what changes need to be made. Don't just hope for the best, make a plan and make adjustments along the way.

Setting Financial Goals

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About the Author: Chris Wang

Chris Wang

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