Growing Old and Less Secure
Growing Old and Less Secure
NEW YORK, Januray 26, 2009 - In a panel discussion on population
aging in Asia and the impact of the current global recession on older
people, co-presented by the AARP’s Office of International Affairs and
Asia Society, experts stressed the need for financial literacy and
education and the importance of avoiding a “culture of consumption” and
over-reliance on Social Security,
The panel, which included Greg Boyko, senior vice-president of the Business Solutions Group and chairman of Hartford Life Insurance KK; Mitchel Lee, consul of Singapore in New York; and Charles Ruffel, chief executive officer of Plansponsor Magazine, moderated by Edward Johns,
associate director of AARP’s Office of International Affairs, pointed
out Asia’s predominance in global aging. By 2050, Japan, South Korea
and Singapore will lead the world in oldest populations.
to Mitchel Lee, some countries, such as Singapore, have been very
proactive in introducing policies that will mitigate, or even take
advantage, of the potential challenges of population aging. Other
countries, such as China and Japan, have taken more gradual steps in
addressing declining labor forces and pressures on pension and other
support systems. Lee stated that Singapore has been making an effort in
bringing more women to the workforce, eliminating seniority pay,
encouraging couples to have more children.
discussed Singapore's universal, mandatory retirement savings scheme,
the Central Provident Fund (CPF). The CPF deducts 20 percent of a
worker’s salary and is regulated by the government. Funds are available
when the worker turns 62. The CPF has an earnings return of 4-5 percent
and employers must contribute to the fund as well, but at a lower rate
(currently 14 percent). The funds can also be used to purchase a new
home or medical and education expenses.
Boyko discussed the dangers of obesity globally and its impact on
retirement savings and the ability of older people to work longer.
While only 5 percent of Chinese and Japanese are currently obese, the
rate is increasing rapidly. Chinese cities have an obesity rate of 30
percent (in the US, 49 of 50 states has an obesity rate of over 20
percent). Obesity is also affecting the cost of healthcare. Boyko
stated that treating obesity costs healthcare companies more than
treating smoking, drinking and aging combined. He suggested that public
and financial policy changes could be influential in leading people to
live healthier lives.
The panel agreed that
the cornerstone of making wise financial decisions relies on financial
literacy and education. Charles Ruffel stated that Americans have
failed in learning about the importance of savings or investing
intelligently. In the US there is a culture of consumption, living
beyond our means, and an over-reliance on Social Security. He discussed
how the Obama administration is considering creating a mandatory IRA
for all workers, although he cautioned this would be very expensive to
implement and maintain. According to Ruffel, the savings amount would
be small for the retiree and it would undermine the 401K system. He
feels the current administration will move forward in that direction.
problem of living beyond our means is not only relevant to the US. Lee
stated that Singapore has been experiencing credit card defaults and
lower savings rate. He feels that the current economic crisis will
force people to change their habits and develop habits of austerity. He
also acknowledged that employers have the responsibility to help their
employees develop a savings plan.
agreed that financial literacy is an important step to understanding
how to save, invest wisely and handle finances more responsibly. They
also stressed that in order to prevent the challenges of shrinking
workforces, countries may need to be more open to immigration to
supplement the shortage of labor and look to education, training, and
other means to increase future productivity.