Article at a glance:
As people in Japan, the United States, and the countries of Western Europe grow older, bank accounts in these nations, where most of the world's wealth is created and held, are likely to grow more slowly. Because people save less after they retire, and younger generations in their prime earning years are proving less frugal than their predecessors, savings rates are set to fall dramatically—with dire consequences for living standards in wealthy and poor nations alike.
The take-away
If no action is taken, the coming slowdown in global savings and the decline in projected financial wealth could depress investment and slow economic growth. A concerted effort to boost savings rates, shrink government deficits, and increase returns on financial assets can help avert this outcome.
This article includes the following exhibits:
- Exhibit 1: Aging populations—Japan, the United States, and Western Europe
- Exhibit 2: Demographic effect of aging on household wealth
- Exhibit 3: Global life cycle savings patterns
- Exhibit 4: No easy answers—5 approaches analyzed