Understanding the Math

An important requirement for future retirement security is improving financial literacy, Mitchell says. "If I had it to do over again, I would have started with educating kids from very young ages." Her research shows that in states where high school students have been provided with mandatory financial literacy classes, the students reach young adulthood with more knowledge and ability to manage key financial decisions -- including planning for retirement. These programs are most effective when school districts devote money to support the instruction. "It's not enough to simply mandate financial education. You also have to put some resources into it." She adds that she is also concerned about middle-aged workers who lack basic understanding of math and financial literacy, and elderly people who may become increasingly vulnerable to scams.

Mitchell acknowledges that her "message is straightforward and, I fear, not particularly upbeat." She argues that the financial crisis has made it all the more apparent that retirement systems around the world are in need of major overhaul. "The 21st Century economy requires an entirely new perspective on retirement risk management," she writes. "We need to build a new framework that will require public and private partnerships to better educate people about the risks they face, to help them work longer, to create and foster new financial institutions and contracts, and to better regulate products and markets for an aging world."