Global Pension Underfunding Will Hit Nearly Half A Quadrillion Dollars In 2050

Tyler Durden's picture

Earlier this week we highlighted "Six Terrifying Graphs That Summarize America's Public Pension Crisis" which ranked state, county and city-level public pensions in the United States by which are screwed the most.  To summarize, the study concluded that public pensions in the U.S. alone are currently underfunded by nearly $4 trillion and that taxpayers in Illinois, California and New Jersey should probably be looking to move before getting drowned in their state's coming pension-induced tax hike tsunami.

Of course, as we've argued before, the current pension underfunding levels are sure to only get worse over the coming decades as the world will have to contend with a wave of retiring Baby Boomers and a period of lackluster, volatile returns.  So how bad could the global funding gap get?  Unfortunately, the World Economic Forum (WEF) recently set out to solve that impossible math equation and it turns out the answer is about $400 trillion...give or take a couple trillion.


Not surprisingly, the WEF attributed their terrifying conclusion to an ageing population, lack of savings, low expected growth rates and financially illiterate citizens.

Long-term, low-growth environment: Over the past 10 years, long-term investment returns have been significantly lower than historic averages. Equities have performed 3%-5% below historic averages and bond returns have typically been 1%-3% lower. Low rates have grown future liabilities, and at the same time investment returns have been lower than expected and unable to make up the growing pension shortfall.


Inadequate savings rates: To support a reasonable level of income in retirement, 10%-15% of an average annual salary needs to be saved. Today, individual savings rates in most countries are far lower. This is already presenting challenges where traditionally defined benefit structures would have provided a guaranteed pension benefit. Now, as workers look at their defined contribution retirement balances, with no guaranteed benefits, they are realizing that the retirement income their savings will provide will be much lower than expected.


Low levels of financial literacy:  Levels of financial literacy are very low worldwide. This represents a threat to pension systems which are more selfdirected and which rely more on private savings in addition to employer- or government-provided savings.

Of course, ignoring that minor ~20 year increase in life expectancy over the past 60 years without raising retirement ages can take a toll on those present value calculations of future liabilities.


Oh, and turns out that politicians creating massive ponzi schemes to promise citizens that their government would take care of their financial needs in perpetuity, while never really bothering to explain the true costs of such programs, was probably a bad idea.


But luckily these politicians are exempt from being prosecuted for their financial taxpayers will just have to deal with picking up the $400 trillion tab.


The full WEF study can be viewed here:

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ThirdWorldNut's picture

Pension receivers will increasingly live longer, contributers will be replaced by robots.

Rest is just math.

silverer's picture

Robots will contribute? I doubt it. Machines are cheapskates.

root superuser's picture

Reading comprehension much. The guy didnt say robots will contribute, he said robots will replace those that do.

Croesus's picture

Peak government, people.

Let's hope a race of right-thinking aliens contacts us, and offers to take us out of here; I don't know if I can survive the "hyperinflation of human stupidity".

Y'all know it's just going to get worse.

Charles Wilson's picture

Time to cull the old, the weak and the lame from the herd.

Stuck on Zero's picture

I'm going to write a book: "How to Comfortably Retire on $5 per Day."

Vlad the Inhaler's picture

You are going to wish this was peak government.  They're going to stop at nothing to avoid deflation aka losses for their bankster cronies.  Ban cash, negative rates, helicopter money disguised as universal basic income, confiscate PM and crypto, CB buying ETFs, god knows what other commie schemes their sick minds will dream up.  It's just getting started.

TheRideNeverEnds's picture

They can easily goose the S&P past 1,000,000 in the next thirty years, that will fix it.

400 trillion SOUNDS like a lot now but in the 80s a few billion was a tremendous sum, now billions are tossed around daily like they are nothing.

bornlastnight's picture

True...but robots have no union representation.  Thus, they will conform and ante up.

So it is written, so shall it be enforced. ~~Big Government

gadzooks's picture

Yeah its not the Obama \ Global prospectus  Sceam thats the problem , its those incoming robots

ThirdWorldNut's picture

You are confusing whats in the rear view mirror with whats in the front. Most of the damage by globalization has already been done, it can only hurt incrementally from here on. Next onslaught would be would be from AI and it will be so much more brutal.Good Luck!


HRClinton's picture

Let them eat Soylent Green!

Buy the ones with the Kosher seal of approval. 

Giant Meteor's picture

A mere flesh wound ..

Croesus's picture

Just FYI, I'm voting for you in 2020.

Sonny Brakes's picture

Why are you telling me this now?

gimli's picture

Just give the bill to Mark Zuckerberg

yogibear's picture

The federal reserve likes owning everything and creating magical money. They can do their backdoor buying (secret buyer in Brussels)can bypass the treasury and buy up special bonds for funding the 100s of trillions. Zimbabwe American style.

NoWayJose's picture

Pensions are NOT underfunded - the fiat currencies are OVER valued - but not for too much longer.

TheSilentMajority's picture

Calm down.

The Fed and BoJ and ECB and SNB will simply print more digital money to fund the stock market to allow the pensions to stay afloat.

Problem solved.

Semi-employed White Guy's picture

Once whites are a minority and therefore no political threat, the DC-Manhattan axis of parasitism thinks it will just be able to confiscate our 401Ks. 

krampus.'s picture

I don't think it will take whites losing the majority. I just think it will take a democratic congress and WH. Who cares it's not their money. They are already advertizing govt pension advisers. They have kicked around putting everyone in T-bills, so it's not far off. 


bowie28's picture

Good to know at least one person here doesn't get caught up in the hyper-inflation hysteria...  Understanding of modern Central Banking is sorely lacking in this forum.  Here's a suggestion for some weekend reading:

A New York Times Bestseller

“A fascinating account of the effort to save the world from another [Great Depression]. . . . Humanity should be grateful.” Financial Times

In 2006, Ben S. Bernanke was appointed chair of the Federal Reserve, the unexpected apex of a personal journey from small-town South Carolina to prestigious academic appointments and finally public service in Washington’s halls of power.

There would be no time to celebrate.

Giant Meteor's picture

A New York Times best seller eh? You don't say.

March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.” Ben Bernanke


Antifaschistische's picture

nailed it...we will make sure everything gets funded.

We will NOT guarantee a gallon of gas will be under $10 per/gallon...or that your electricity bill will be under $1,000 per/month....but, in the meantime...go ahead with upgrading to the 4,871 square foot home.   And this scenario doesn't even taken into consideration what would happen if the Saudi's ever dropped the PetroDollar.

Bam_Man's picture

No it won't.

The whole pension Ponzi scheme will collapse L-O-N-G before then.

gaoptimize's picture

And if you follow trends in extreme longevity science, we will reach escapre velocity circa 2030.  I've already notified my company I intend to be the first 100 yeear employee.

xrxs's picture

That's only 57,000 per person on the planet.  We got this.

directaction's picture

Closer to $55,000 per person on Earth.

HRClinton's picture

The Carbon Tax levied against Western countries will cover it.

Merkel and Obama said so.

Ajax-1's picture

So what is $400 Trillion between friends? (Sarc)

indaknow's picture

Ponzis' are great for the "folks" cashing out first. No so much for everyone else though. 

backwaterdogs's picture

Go to home page and hit redresh

GubbermintWorker's picture

Yep, I knew I was fooked a long time ago.


itstippy's picture

Of course pensions are underfunded.  EVERYTHING is underfunded: schools, roads, churches, libraries, the space program, meals on wheels, radioactive waste cleanup, the navy, global warming research, the PTA, corporate R&D, the kids' college fund, food stamps, National Public Radio, NATO, Obama Presidential Library, Willie Nelson, the Clinton Foundation, MADD, the Burbank Needle Exchange, Mike Tyson Inc., Toys For Tots, Black Lives Matter, . . . EVERYTHING.

Well, Facebook, Apple, Netflix, Google, and Tesla seem to to be doing OK.  But everything else desperately needs more funding.

GoldHermit's picture

I rarely give advice but here it goes...

If you are relatively young (under 40), I highly recommend you save on your own and limit your reliance on others. It will set you free and you will be ble to tell the vast majority of the world where to go!

Alien 851's picture

GoldHermit: You have hit the bullseye.  Free thinking people would benefit from not placing their desiny in the hands of anyone else, especially a politician. We see the results daily with every subject possible, failures heaped upon scandals, piled upon prior failures. When will folks learn that the best manager of your affairs is you.

FIAT CON's picture

GH. I couldn't agree more!

I commony say to people  "save you rmoney you are going to need it in your retirement"!

Most people just look at me, and don't know what to say.  Everyone thinks I'm nuts.

Most people are definatley Financialy iliterate!

Another thing that just floors me is economists and gov representititves state that we must spend are way out of this, yet the richest 10 people in the world have more wealth than the rest of us, shouldn't they be the ones who should start spending, raising wages etc.

Oh wait, it's not about us, it's about them.


Antifaschistische's picture

You must be young.  :)   I stopped giving advice to others a long time ago.   No one will listen.

HRH Feant2's picture

Same here. Oh well, too bad for them! There is already one person that regrets not listening to me! By the end of this mess I expect them to be lined up around the block.

HRClinton's picture

Live on 75% of your income and invest the rest wisely. Don't forget to shelter it safely and discretely. 

Never marry anyone who does not share your views and policies, or it will be all in vain. Especially when the divorce lawyers enter the picture. 

HRH Feant2's picture

Never marry anyone without a prenup. It makes sure that everything is decided, in advance, prior to having to deal with divorce lawyers. Each party needs to hire their own representation when writing the prenup. I call that one thing: cheap insurance.

VWAndy's picture

 The math works if you just keep streatching the rubberband. Really its that simple.

rockstone's picture

And it works even better if you, a pensioner, die at an old age just before it breaks.

pitz's picture

The major defect in pensions is that they refuse to cut benefits for those who have already retired.  Seriously, go look at any proposal to reduce benefits, they *never* touch the retirees.  Its even prohibited "by law" in many states/countries.  Even though the retirees themselves have benefitted enormously from consumer price deflation and asset inflation, they almost never bear the brunt of their prior poor decision making.


sonya55's picture

Elites have an answer, Death To Useless Eaters.