Many countries across the world have adopted changes to their retirement systems in recent years because of the anticipated aging of their populations. Much of the discussion about adapting retirement policy to aging populations has been framed around retirement system administration and funding. The discussion of public versus private arrangements usually ties back to the belief that more pension funding is the solution to our demographic and economic challenges.

We believe that the structure and financing of our retirement systems is important. But we are also convinced that limiting the debate to those issues misses some essential points. Whether a pension system is fully funded or financed on a pay-as-you-go basis may ultimately make little difference unless people change their workforce participation and retirement behaviors. To understand this assertion, it is important to consider the economic underpinnings of our pension systems and how they fit into the larger demographic and economic picture.