I didn't see the article, but the looming pensions timebomb has been discussed many times over the past ten years.
As a society, we have taken a first step by setting up the national pension fund and investing a significant proportion overseas. In theory, this money should be invested in countries with younger demographics than Ireland; in practice, market considerations apply.
As a society, we are going to have to face the fact that a constantly increasing dependency ratio cannot be sustained indefinitely. This is going to mean a change in our expectations regarding the age at which we can retire.
The Society of Actuaries have come in for a lot of criticism (much of it ill-informed) for suggesting that the normal retirement age may have to be pushed back to age 75. While those who are close to retirement may not relish the thought of having to continue working for (say) twice as long as they expected, there is no doubt that we are going to have to change our expectations.
Falling birth rates and increasing life expectancies mean that we cannot sustain an environment where employees expect to be able to retire in their 50s and early 60s. One solution may be to have some form of flexible retirement, where people gradually reduce their working hours as they near retirement age or take up alternative, less challenging employment. Having a less pressurised working environment, thereby reducing the “burn-out” factor is also desirable.
From an individual viewpoint, falling investment returns and increasing annuity costs mean that traditional approaches to pension provision may no longer offer the prospect of an acceptable level of income in retirement. We may need to lower our expectations and reduce our pre-retirement consumption so that we can divert a greater proportion of our income to various types of savings, including pension plans, property investment and other types of investment. (Suggestions welcome as to what these might be).
Apologies for the long rant, but there is no simple solution. There is always a balancing act required between current and future consumption and the difficulty is that we have created an expectation of a level of current expenditure that is not sustainable if we wish to have any kind of reasonable standard of living in retirement.
I remember a posting a while back that referred to pensioners living in poverty while surrounded by state of the art hi-fi and video technology from the 1980s and 1990s. This may be the choice we are faced with – eschew the rampant consumerism of the Celtic Tiger era or pay the price when it’s too late to do anything about it.
Food for thought.
Regards
Homer