Day: September 6, 2019

Bitcoin Transaction Worth $1 Billion USD Moved to Single Wallet

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Over $1 billion USD worth of Bitcoin was transferred to one wallet today in a major transaction, making it the fifth richest Bitcoin wallet in existence.

The Richest Non-Exchange Address

A group of large-scale Bitcoin owners, known as whales, moved 94,504 Bitcoins to an unknown wallet, which now becomes the richest non-exchange address, as well as the fifth richest overall. The amount is equal to 0.5% of all the Bitcoin currently in existence. It is not yet entirely clear where the transaction originated from; however, TokenAnalyst believes that at least one third came from the Huobi exchange, while Glassnode claimed that approximately 73,000 BTC came from Huobi.

What was This Transaction For?

The reason for today’s huge movement of BTC remains unknown; however, some analysts and experts have speculated that it could be attributed to the launch of Bakkt Warehouse’s deposits and withdrawals, which took place today. Some more cynical speculators have guessed that it could be a result of the fallout from the PlusToken Ponzi scheme that defrauded users of nearly $3 billion USD, 50% of which was processed by Huobi. Even stranger was the high transaction fee of $700, which suggests the involved parties had speed and security as a priority.

While little is known about these major whale movements, they have become increasingly frequent in recent months. Less than two weeks ago, approximately $700 million USD worth of BTC was transferred into three unknown wallets, and less than 24 hours after, there was an additional movement of $133 million USD of BTC. These transactions add fuel to the theory that they are diverted funds from the PlusToken Ponzi scheme; however, it is impossible to know for sure.

>> LINE Gets Crypto Exchange License from Japan Regulators

BTC Rises Again

Unsurprisingly, the transaction and subsequent attention boosted Bitcoin’s value from $10,569 to $10,790, which coincides with a report from The Independent that Bitcoin price rose by more than $1,000 USD following a record-breaking number of searches for the term “BTC”. Price trends in recent years have shown a direct correlation between increased search engine attention towards Bitcoin and rising BTC value.

Featured Image: Deposit Photos © spaxiax

Here’s how other countries financially support their retirees

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Governments around the world are worrying about their citizens’ retirement security — they just approach it differently. Some use different versions of a pay-as-you-go system, where current workers pay for the benefits of current retirees — just as is done in the United States — while others have regulations that place most of the onus on either employers or employees.

One out of 11 people around the world are 65 or older in 2019, but by 2050, that figure will jump to one out of every six people — or 1.6 billion, according to the United Nations. Keeping their retirement secure and comfortable is a concern for everyone, including family members who may otherwise end up supporting their elderly loved ones and governments that would need to allocate more of their funds toward social insurance programs.

To ensure a comfortable retirement, Australian workers are in charge of contributing enough for their futures — and they do so through a nationwide mandatory defined contribution plan, which would provide income on top of a basic old age pension scheme. Australia also uses investment portfolios, but employers are responsible for contributing most of the assets, and employees are told their contributions are voluntary. The Australian version of Social Security is restrictive, and benefits are reduced or nonexistent for people over a certain income or asset limit. The U.K., on the other hand, mandates employers automatically enroll their workers in a defined contribution plan.

China is upfront that their old age pension system is faltering, and the country’s one-child policy from the 1980s (now defunct, and replaced by a two-child policy) is partly to blame. There aren’t enough workers to support the number of elderly retirees. Japan also has far fewer young workers to support older citizens, and suffers from one of the highest old-age dependency ratios in the world. The government has begun introducing defined contribution plans, similar to a 401(k), which some Japanese workers are gladly using to mitigate the risk of receiving no old age pension down the line.

Some countries are in the midst of reform. Brazil is currently implementing a retirement age, because its pension has been too flexible and generous for retirees, and the country is experiencing rapid aging — thus, making the system unsustainable and dangerous to the country’s economy. Sweden is also changing its retirement age, and increasing the age in which companies can force employees to retire. This Nordic country, however, already experienced significant changes to its pension system in the 1990s, including a portion of employer and employee contributions going toward a private individual investment account for workers.

And then there’s the United States’ Social Security system. The program is beloved, but it is also in need of attention. If nothing is changed, the two trust funds that support Social Security are at risk of running out of money by 2035, in which case retirees would receive 80% of the benefits they’re owed. But millions of Americans rely on Social Security for most, if not all, of their retirement income. Politicians, including presidential candidates for 2020, aren’t talking too much about solutions to this problem, though legislators have considered raising the full retirement age and increasing taxes to help fund it in the past.

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Brazil wants to make it harder to become a retiree

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After decades of a lax social security system, Brazil is finally reforming the program to benefit older citizens — and some hope it could bolster the country’s economy as a whole.

Their version of social security is generous — a little too generous, critics say. Like the U.S., it is a pay-as-you-go program, but there is no set retirement age, which means after workers reach the minimum number of work credits they need, they can claim benefits. The country is also suffering from rapid aging, so under the current framework, there will soon be too many retirees claiming benefits and not enough workers to support them.

“The system is unsustainable,” said Leandro Palmeira, director of research at the Longevity Institute and chief of staff at Mongeral Aegon in Brazil.

The pension system is affecting the country’s economy, leaving less money for other important social programs, such as education and public security. Less than 10% of the population is over 60 years old, and yet Brazil spends 14% of its current gross domestic product on its pension. “If you look at the projections, we will reach something like 25% or 26% of total population over age 60 in a few decades, and the trajectory of spending on pensions will explode if we don’t do something now,” Palmeira said.

Brazil’s lawmakers have done something. The legislators’ proposals would set a minimum retirement age for when citizens can claim their benefits — 65 for men and 62 for women working in the private sector — unlike the current system that allows people to begin claiming in their 50s, or anytime after working between 30 and 35 years. The bill, which passed through the lower house in July but has yet to make it through the Senate, would also increase contributions from the current workforce. The reform could save the public the equivalent of $247 billion over a decade, according to the government. Voting is expected by the end of September.

The Senate is also weighing a plan to introduce individual retirement plans, though that may end up in a separate proposal.

Retirement across the globe has changed. In the U.S. Only a few decades ago, it was common to retire around 65 and collect Social Security for a few years before passing away. Now, Americans — and most others around the world — can expect to live longer, healthier lives, and they may want or need to work during a part of this chapter.

“We have the potential to live longer than anyone else in history, and that is putting a tremendous strain on retirement systems around the world,” said Catherine Collinson, chief executive officer and president of nonprofit Transamerica Institute and Transamerica Center for Retirement Studies. Some of the changes Brazil has proposed, such as increasing the retirement age (or in this case, creating one), are not easy to pass, she added.

Still, it may be the only way to ensure retirement security for all — and bolster the economy as a whole — for Brazil. “It will be harder to be a retiree in Brazil,” Palmeira said. “Our parents and grandparents lived in a country where it was very easy to become a retiree, and this scenario is changing because the world has changed. The country has changed.”

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Social Security is a lifeline for many older Americans, but how will it be funded in the future?

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The United States’ Social Security system is both beloved and neglected.

As it stands, the program — which provides benefits to retirees, the disabled and impoverished, as well as children of deceased parents — is facing insolvency, and if the government doesn’t act, beneficiaries will see a 20% cut to what they’re owed by 2035, according to the Social Security Administration’s trustees report earlier this year.

Social Security is a pay-as-you-go system, meaning today’s workers are paying for current retiree benefits, and they’ll eventually receive benefits that future workers are paying. There are two trust funds that support the system, and any extra reserves in a given year go into those accounts (though, when there’s an annual deficit, that same money comes out to fill the hole).

Most presidential candidates have not touched on the future of Social Security in their campaigns, and politicians occasionally resuscitate solutions that have been discussed for decades: raising the full retirement age, which is when people can claim 100% of their benefits, or increasing taxes, for example. Both are controversial, however, as they inadvertently hurt a segment of the population — raising the retirement age keeps benefits away from elderly people who may need it now, and increasing taxes can become a burden to young workers, critics argue. There’s also a proposal to raise the ceiling of the payroll tax cap, so that high-earners pay more into the system. Experts say Congress has never let Social Security run out of money, but it will take its time to decide what to do to fix it.

For some Americans, Social Security is a supplement to other sources of retirement income, such as their own savings in a 401(k) plan or an employer-backed pension. For other Americans, the benefit is a lifeline. Social Security benefits make up the majority of retirement income for 61% of elderly beneficiaries, and a third of them rely on the program for 90% or more of their income, according to the Center on Budget and Policy Priorities, a governmental budget policies think tank in Washington, D.C. The average monthly retirement benefit was slightly more than $1,400 in July, though the benefit payment depends on work and wage history.

The Trump administration reportedly mulled plans to cut the payroll tax, at least temporarily, to help the economy in the wake of a potential recession. The cut would have put more money in Americans’ paychecks, but could have hindered the future of Social Security and Medicare — which rely on that payroll tax. A similar plan was implemented during the Obama administration after the financial crisis, but the government paid the employees’ share of the tax thereafter (increasing the deficit but leaving the program unharmed). No details were shared about what a possible cut would look like, including how long it would last or how much would be shaved, and President Trump has since denied it is under consideration.

Still, not all Americans are certain they’ll ever see a Social Security benefit. The notion of politicians saying the system is in trouble, or advisers saying clients shouldn’t calculate benefits into their future plans, hurts citizens more than helps, said Teresa Ghilarducci, a labor economist and director of The New School’s Schwartz Center for Economic Policy Analysis and the Retirement Equity Lab.

“That is a campaign,” she told MarketWatch. “There is a vested interest to ignore and belittle Social Security,” she said.

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Sweden partially privatized its Social Security — here’s how it has worked out

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As part of sweeping pension reforms in the 1990s, Sweden made a part of its Social Security system private.

Employers and employees contribute 18.5% of workers’ salaries to the country’s pension system, but about 2.5% of that goes into a privatized investment account earmarked solely for an individual, called a “premium pension.” Employees can choose how that money is invested, and are offered a list of funds to choose from. “It could potentially lead to an increased future pension because of financial returns, and also to diversify the source of funding,” said Hervé Boulhol, senior economist of pensions and population aging at the Organisation for Economic Cooperation and Development.

Separating the pension into individual accounts was meant to garner interest and commitment to the system. Swedes receive a bright orange envelope in the mail with account statements, and the psychological effects have reportedly enticed some to work longer, The Wall Street Journal reported.

The Swedish system also requires, or encourages, workers to take time to research the funds and choose the appropriate one for their portfolios, according to Brookings. Not everyone will choose wisely.

Sweden is now in the midst of another wave of pension reform. Currently, retirees can withdraw from their pensions any time between ages 61 and 67, but under the new rules, they’ll have to be a specific age — in 2023, they’ll need to be 62, for example. By 2026, the age will be 64, and thereafter the age will be tied to life expectancy rates, said Annika Strandhall, Sweden’s Minister for Social Security. The country is also extending the right to stay in the labor market, as opposed to being forced out at 67 if the company wants (as is the case now).

And there’s still more work to be done, especially in regards to ensuring women and new parents are properly covered. “These groups feel they are not getting out from the system what they should get,” Strandhall said. “They also feel like they have lost when they changed the pension system in the ‘90s.”

Privatizing a portion of the pension system was just a small piece of the previous reform, but it is something the U.S. couldn’t do. President George W. Bush proposed privatizing Social Security in the early 2000s, arguing the system had funding issues and needed to be changed. Critics said private accounts could hinder Americans’ future retirement security, since so much of their money would be at risk if the markets were to see a downturn.

While investments are naturally risky, having a privatized account solely for individuals could safeguard them from any political risk. Defined contribution and, in rare cases, defined-benefit plans, are also available.

So far, the country has proved its system works — the Swedish pension has survived during periods of market volatility, including the Great Recession, Boulhol said. “The system proved to be resilient,” he said.

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U.K. companies are required to enroll workers in retirement plans — and it’s helping them save more

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Saving for retirement in the United Kingdom has become a given.

The U.K. was the first nation to require all companies in the private sector to enroll their employees in a defined contribution retirement plan. The process has been gradual since 2012, but has already shown significant improvement in the amount of money citizens have saved for their futures — compared with when workers were left to sign up for an account on their own.

About nine in 10 workers at medium and large companies are now contributing to a retirement plan, and 70% at small employers, according to an analysis by the Boston College Center for Retirement Research. Comparatively, 51% of Americans in the private workforce were participating in a workplace retirement plan, according to the Pension Rights Center.

The auto-enrollment mandate, referred to as the NEST program (short for the National Employment Savings Trust), is layered on top of the country’s public old age pension, similar to the U.S.’s Social Security. The government-backed pension is basic, said Ramsey Alwin, director of thought leadership in financial resilience, policy, research and international affairs at AARP, but the British also don’t have to worry as much as Americans about expensive medical costs in old age, since the country has state-funded health care.

Retirees receive $169 a week under the State Pension, but the amount can be higher if they delay their benefit payments (similar to the U.S. system). Eligibility age varies for men and women depending on their date of birth (for example, a man is eligible this year if he is 68 years old, and a woman if she’s 66, both born after April 6). They must also have worked for at least 10 qualifying years.

The NEST program doubles down on retirement security though, as a means to ensuring residents are comfortable in retirement.

Here’s how it works: U.K. employees are eligible for the government-sponsored workplace retirement plan, which invests those assets, if they’re at least 22 years old but no older than 65 or 63 (the state pension ages for men and women, respectively), earn at least $13,000 (converted from euros) and were with their company for at least three months. Beginning in April 2019, employees must contribute at least 5% of earnings and employers must contribute at least 3%, for a total minimum contribution of at least 8%, according to the Pensions Regulator in the U.K. Those minimum requirements have slowly increased each year. Companies were phased into this mandate, beginning with the largest employers.

The system is working, so far. Employees at medium and large companies saw participation rates jump 37% after auto-enrollment was implemented, and smaller employers saw a 44% increase. Lower earners, employees under 40 and people who had been with their companies less than four years benefited the most from auto-enrollment, Boston College found.

Encouraging employees to put money away for retirement is always a good thing, and yet there’s a caveat. Employers are enrolling workers with a low contribution rate, which may ease them into getting started, but doesn’t add up to enough if they continue to save the minimum rate throughout their careers. Bottom line: If workers don’t consistently ramp up contributions, they won’t end up saving very much for retirement.

Sometimes employees consider the contribution rate they were enrolled with to be a suggestion from their employer, or they may never get around to changing it on their own, even years after they were automatically enrolled. If they do increase the rate, they may still not put as much away as they should (in the U.S., for example, companies that auto-enroll workers in a 401(k) plan start with 3% to 6% of an employee’s salary, but financial advisers typically suggest Americans save as much as 15% or more for retirement).

Still, the U.K.’s system shows promise, especially as so many citizens across the globe lack retirement savings. “That pooled federal platform is critical,” Alwin said, especially as workers move from job to job, and life expectancy increases. “It is a very important step in the right direction.”

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Retiring in Japan: Seniors greatly outnumber younger workers — and that’s a big problem for everyone

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Japan has one of the highest old-age dependency ratios but not one of the highest retirement income replacement ratios. That could spell trouble for its citizens, now and in the future.

The old-age dependency ratio measures how many people there are over 65 years old to those who are between 20 and 64 years old. In Japan, the ratio was 46% in 2018, compared with 23% in the U.S. and 14% around the world, according to the World Bank.

Japan has a pay-as-you-go pension system, similar to many other countries around the globe, including the United States. Fertility rates and life expectancy are also key factors to consider when projecting the future sustainability of the program, but the fertility rate in Japan has dropped since the 1970s, while life expectancy has grown during the same time, according to the World Bank.

To ensure retirement security, the Japanese should weigh other means of retirement income — something they’re slowly beginning to do. The pension system replaces about 35% of preretirement income, compared with 38% in the U.S. But many Americans also rely on other sources of income, such as a 401(k), which drives the replacement income ratio to 71% on average, said Hervé Boulhol, senior economist of pensions and population aging at the Organisation for Economic Cooperation and Development. Comparatively, with voluntary savings, the Japanese’s replacement ratio goes up to 58%, which is still relatively low. About half of the working population in Japan are covered by such a plan.

The country has slowly been integrating its own version of a voluntary individual retirement plan, following the path of the United States. The country passed legislation to increase funding requirements and introduce defined-contribution plans beginning in 2001, in an attempt to bolster retirement and economic security, according to a report published in the U.S. National Library of Medicine. These individual retirement accounts have become popular among the Japanese, some of whom are aware the government may have trouble paying out benefits, the Japan Times reported.

The old-age dependency ratio doesn’t have to mean doom, said Paul Irving, chairman of the Milken Institute Center for the Future of Aging.

The ratio assumes productivity drops after the mid-60s, and that older populations need to retire — but that’s not true, Irving said, and such an assumption can be dangerous to society. Prolonging a career and remaining in the workforce is not only healthy for many people, but it could deter a pension system from faltering because of the influx of older people claiming benefits. “The dependency ratio places a cloud over the kind of creativity, opportunity and possibility that exists to reimagine what a workforce and population of the future will look like,” Irving said.

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Personal Finance Daily: Why the best person to turn to for money advice may be a psychotherapist and the technology that should finally make your wallet obsolete

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Happy Friday – and have a great weekend – MarketWatchers. Don’t miss these top stories:

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Australia’s safety net for retirees is generous and comprehensive — and complicated

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With such a restrictive pension system, Australians need to ensure they’ll have enough money when they retire — one reason why the country’s superannuation program has become a necessity.

Superannuation accounts are similar to the U.S.’s 401(k) plans, but the Australian government mandates employers contribute to them. Each year, private-sector employers must put the equivalent of 9.5% of their employees’ salaries into these accounts, out of the employer’s own assets and not the wages of their workers. Employees can then voluntarily contribute their own earnings to the account.

The employer’s contribution will gradually increase to 12% by 2025.

Australians may get this benefit from employers because of the government’s rules, but they face severe restrictions when applying for the Age Pension, Australia’s version of Social Security. The Age Pension is means- and income-tested. The age requirement for beneficiaries is gradually increasing from 65 to 67 years old, and individuals must be a resident of the country for at least 10 years to be eligible for benefits (five of which must be consecutively). Single individuals can get a maximum basic rate of $844 every two weeks, and couples can receive no more than $1,272 in the same time frame. Single retirees who earn more than $2,026 every two weeks in retirement are cut off from the Age Pension (and $3,100 for couples).

Benefits are also limited based on how much residents have in assets, including non-principal homes, business ownership, overseas accounts, investments and, if you’re above the retirement age, superannuation funds. Payments for single retirees who are homeowners are canceled out if they have more than $263,250, or $473,750 for non-homeowners. Couples with combined assets have a limit of $394,500 in assets if they’re homeowners, and $605,000 if they’re non-homeowners, before benefits are canceled.

“It really is a safety net, and it is strictly enforced,” said Ashley Murphy, founder of Arete Wealth Strategists, a financial planning and investment management firm that works with American and Australian clients.

Superannuation funds are a hedge against the risks of entering retirement with little to no savings. The average man approaches retirement with $300,000 in his superannuation accounts, and the average woman has about $160,000, said Stephen Huppert, a consultant and adviser to Australian institutions in the retirement industry, including those that administer superannuation funds. While the system is generous, there is room for improvement, he said, including ways to help women’s superannuation contributions while on paid maternity leave and the growing population of gig economy workers. There’s also little education during the decumulation phase, when Australians are asked to choose to take a lump sum of their assets or use some or all of the balance to purchase a retirement income stream.

Still, having an employer-funded account to fall back on — especially if employees also contribute — bolsters financial security and a successful transition into retirement. Australia was the fourth-highest ranked country for global pension assets in total last year, behind the U.S., Japan and the U.K, according to Willis Towers Watson’s Global Pension Assets Study released in February. “That’s substantial when you consider it is one-fourteenth of the U.S. population,” Murphy said.

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How China’s one-child policy helped to endanger its retirees

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A large workforce is critical for a pay-as-you-go system, but China is facing a larger aging population at the moment — and the country’s now-defunct one-child policy is partly to blame.

For nearly 30 years, China limited families from having more than one child, in an attempt to slow the country’s population growth rate. But the regulation is now taking a toll on its government-backed pension. China, like the U.S., has a public benefit program that relies on tax revenue from the workforce, and having so many more older residents than younger workers has become a burden to the system — one that already had trouble paying out its benefits.

The country increased the limit to two children in 2016, though the effects of that increase won’t be felt for years to come. The workforce will continue to decline into 2030, and then begin to tick upward thereafter by the higher birthrate from the new two-child policy, according to a 2018 report published in the Lancet, a medical journal.

Along with fewer people in the workforce, China also struggles with citizens living longer — a blessing, except where the pension system is concerned. The one-child policy led to an imbalance in the number of those aging, many of whom may find themselves in poverty. Older Chinese live in poverty at higher rates than the rest of the globe. The rate of people 60 and older living in poverty in urban areas of China is 4.6%, compared with an average 3.4% elsewhere, but the rate for those living in poverty in rural areas is 22.3%, compared with the global average of 7.8%, according to HelpAge International, a London-based nongovernmental organization focused on elderly issues.

China is also in the midst of pension reform. The country began expanding pension coverage in 2003, in part to assist elderly residents in rural areas who are rarely covered by the program. The basic principles of China’s system include employers and employees both making contributions to pensions, medical and unemployment funds, and having local governments manage insurance funds, according to the China Labour Bulletin (CLB). Under the reform, social insurance benefits are expected to follow workers wherever they go.

Still, even with these new provisions, many workers may eventually retire with little or no benefits, and the country is moving toward a system that relies heavily on individual contributions, the CLB said. “They’re IOUs — not a real pre-funded system — and the Chinese are very upfront about this,” said Tim Kochis, chief executive officer of consulting firm Kochis Global and vice chair of the board of the Asia Foundation, an international nonprofit committed to improving the lives of people in developing Asian countries. “The economics of it don’t work.”

Not only did the policy affect the efficiency of the country’s pension, but it has also put extra pressure on young individuals, who are expected to care for themselves, their parents and in some cases, their grandparents, too. Many Chinese citizens traditionally care for their elderly family members, physically and financially. “You have an inverted pyramid,” Kochis said. “They’ve set themselves up for a serious problem, from a cultural expectation standpoint.”

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