Retirement today bears little resemblance to what it was for prior generations. In the United States and many other parts of the world, the way people prepare for retirement has changed dramatically. Few people can look forward to the 20th Century ideal of living comfortably off a pension. Even those who have saved in retirement accounts are faced with retirements that may last two to three times as long as was the norm a generation ago.

Increasingly, the burden of funding retirement has fallen on people’s own shoulders. It’s not surprising that growing numbers of people are working past what was once thought of as retirement age, whether because they want to or need the income. Today, 20% of Americans 65 or older are still in the labor force compared with 13% in 2000.

This transformation of the retirement landscape can be bewildering. And it’s not just a U.S. phenomena – it’s happening around the world. As part of our global retirement research we spoke to couples in Mexico, England, Chile, Australia, Germany and here in the U.S. to see how others are preparing for 21st century retirements.

But first, let’s explore how and why retirement is changing across the globe, and we’ll finish up with some thoughts about what you and your family can do. The fact is comfortable retirement is within reach. But it takes resources, knowledge and commitment to get there. There are three factors that will shape retirement in the years ahead:

Longer lives, fewer children

Around the world, people are living longer thanks to improved standards of nutrition, medicine and public health. Worldwide, some 800 million people are 60 or older. By 2050, the number will more than double to about 2 billion. As people live longer and have fewer children, meaning fewer people paying into the system, skewed populations will put enormous pressure on public and private pensions. Specifically, the World Bank puts the global dependency ratio at roughly 54% today. In other words, the proportion of people who have aged out of the labor force is higher than those who are still working.

The World is Getting Older


Source: U.S. Census Bureau International Data Base (IDB)

Of course, for individuals, the prospect of a long life is great news. But it does raise a major question: Will people have enough resources to live comfortably all those years or will they outlive their money? Most people react to the possibility of a longer life span by stepping up their saving, hoping to put away enough money to cover any eventuality. But the total size of your nest egg can be misleading. As I’ll explain, it’s more useful to think in terms of the annual income your savings will generate. That makes it easier to figure whether you’ll have the means to pay the costs of a long lifetime.

A gap in retirement savings

The stark reality is that many people are falling short on their retirement savings goals. BlackRock’s 2015 Global Investor Pulse Survey finds that, on average, Americans ages 55-64 require an average of $45,400 annually to satisfy expenses in retirement. Unfortunately, they’ve only saved an average of $136,200, yielding them just $9,153 of annual income – a gap of $36,300, excluding Social Security.

The good news is that even those in late middle age can take steps to shore up their retirement finances. It’s vital that people set—and stick with—larger annual savings targets. They might also think about continuing to draw a paycheck beyond traditional retirement years.

Shifting the focus to income

When they think about financing retirement, most people focus on wealth accumulation—building a savings stockpile big enough to pay for living expenses, discretionary items like travel and, eventually, the costs of special care. Setting aside something for kids or elderly parents may also be part of the equation. The trouble is, individuals have no way of knowing how long they’ll live, which means they can’t tell how long their savings will last. So they agonize: Do I need $1 million, $2 million, $3 million? What if something awful happens? Meanwhile, their mood swings with every change in the value of their 401(k).

We believe it’s important to look at retirement investing in a different way. Instead of focusing on the size of the nest egg, we need to think in terms of retirement income. How much annual income will you need to fund the lifestyle you want? If you are able to plan to achieve a specific retirement income goal, having a plan feels more meaningful and relatable to our daily lives.

What does this mean in personal terms? Remember this is not simply an American problem – it’s felt across the globe. While retirement systems may differ from country to country, here we are focusing on some common themes.


What We Can Do

It begins with knowledge

A look at the evolving global retirement landscape shows challenges to be sure, but opportunities as well. In advanced and developing countries alike, pension systems are being transformed in many different ways and people are finding they have more responsibility to take care of themselves. At the same time, the range of options for financing retirement is constantly expanding. As the retirement toolkit grows, planning and preparation are increasingly rewarded. Opportunities to work are proliferating too—not necessarily the daily grind that people long to leave behind, but creative alternatives including start-up businesses and part-time, home-based and contract jobs.

The people we spoke with come from faraway places at different stages of development. But they are all redefining retirement—thinking about the next phase in different ways than the generations that came before them. It’s not always an easy road. Some of our couples are working longer than they want or facing lower incomes after they retire. For all of them, retirement planning is more complicated than when people could count on a public or private pension to carry them through. But our couples are more youthful and healthier than previous generations. They have more choices available to them. And the world is a much smaller place—something most of them are determined to take advantage of.

In every country, there are opportunities to improve public and private retirement systems to help people live better. People require the knowledge to make wise choices, the resources to live well and the tools to accomplish their goals.