Grey tsunami is set to sweep over retirement dreams

How much of an achievable dream is a comfortable retirement?

Of the eight siblings my wife and I have between us, only we have so far managed to breed. The rest of the clan is childless.

Clearly, what we have here is a failure to replicate. All across the developed world, people are growing old without having offspring to blame their grey hairs on. I can understand this. Children are annoying, demanding and horribly expensive. It's easy to see why people would rather spend an evening geared towards adults than watching Barney the Dinosaur.

But the falling birthrate in developed economies is without a doubt shaping up to be the biggest long-term personal finance challenge we will collectively face. The ratio between young and old is changing and soon, the whole world will look like Florida.

In the past, children were a sort of pension fund. They would take care of us when we reached the point where bending over to plant a potato was no longer possible, or dignified even. Nowadays, of course, we are expected to take care of ourselves or, at the very least, move to a country where social welfare will do it for us.

European Union figures show the birthrate in Europe is now well below the replacement rate of 2.1 children per couple; it's now at about 1.1.

As playgrounds fall empty, some countries are beginning to pay parents to have kids in the hope of reversing, or at least slowing, the trend.

The same problem, in varying degrees, is reflected in much of Asia. Even the US, which had until recently managed to keep its baby count up, is now showing signs of decline. About 80 million Americans will retire in the next decade.

The baby-boom generation, those born in the US during the exuberant years after the end of the Second World War, outnumbers Generation X, that followed them by 15 million. As the boomers shuffle into geezerdom and take money out of the system, it will be up to those following to somehow replenish it.

For those of us too young to retire, but old enough to accept we will never win the lottery, this presents a challenge. Effectively, we must prepare not only to carry our own financial burden when we kick back, but also those of an ageing society.

Already we are seeing the early consequences of this phenomenon.

The French are on the march, again, because the government has rasied the retirement age to 62. German and Austrian workers are also threatening strikes as their respective countries tinker with pension payouts.

There are three possible strategies we can follow to plan for this.

The first is to save more. Given the high levels of debt most us live with, this is no easy solution. But putting away as much money as possible and increasing pension contributions will provide some insulation against the grey tsunami.

The second solution being bandied about is even more unpleasant: reduced pension contributions.

This will mean a big lifestyle cut when we depart our office cubicle for the last time. And because it is the easiest to introduce, it is the one that is most likely to be implemented. Expect pension companies and governments to spend a fortune on spin-doctoring as they try to explain why it's better to be worse off than you expected.

Finally, there's work longer. Even if you are French, it's a sad reality that the day of the Golden Handshake is soon going to look awfully far away.

Since hanging on to a job these days is by no means certain, retirement may come by way of unwelcome retrenchment for many.

It's not all bad news, though. As the population ages, governments will have to become more receptive to the needs of the growing ranks of duffer voters. Prune juice and wintergreen will give way as greater investment takes place in sophisticated health care for the elderly. Which is just as well considering many of us will still be pushing the broom well into our eighties.

Maybe the true silver lining is the one pointed out to me by my dad, who, at 69, still heads to his job each day as a hospital administrator.

"We need the money," he told me, looking furtively over at my mother who sat glaring at him through her spectacles, her knitting needles clacking out yet another scratchy cardigan.

Then he leaned closer and said: "You know, son, sometimes a man just has to have an excuse to get out of the house."