Retirement savings are not like the nuts squirrels gather for winter. Assets can’t be eaten. Assets have to be sold in a capital market: one with enough money to buy them. That, in a nutshell, is Professor Jeremy J. Siegel’s argument on why aging baby boomers should care about the success of developing markets.
In a presentation to the Chartered Financial Analyst (CFA) Institute, Professor Siegel, of the University of Pennsylvania, adds the increase in life expectancy to the decrease in workers and comes up short. Even massive immigration wouldn’t be enough to create the necessary ratio between workers and retirees. The solutions to funding retirement over the next 50 years, he says, are either to raise the retirement age or to encourage globalization and allow the youthful workers of developing countries to buy retirees’ assets.
The later choice would involve a massive transfer of capital ownership to the developing world and a healthy global economy, he says. Siegel concludes that “keeping the world open to trade is critical not only for developing countries but also for the well-being of the developed world.” See the full report.
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