In 2015, the World Economic Forum (WEF) estimated the world’s retirement savings gap at $70+ trillion. Considering the world economy was valued at $78 trillion just a year prior, this is a scary deficit — and it’s growing fast.

By WEF’s estimation, the gap will rise to $400 trillion by 2050. If the deficit really gets this big, hundreds of millions of pensioners may end up living in poverty while future generations spend much of their income on supporting them.

The problem is that pensions were originally designed to be paid for by a young workforce. Now that the workforce is neither young nor growing, fewer taxpayers are supporting each retiree.

The worker:pensioner ratio was 12:1 in 1950; by 2050, it’s projected to be 4:1. This puts a lot of strain on tax paying workers, and means that future pensioners may get a lot less or even nothing at all.

Fortunately, this outcome isn’t inevitable. But in order to do better, it’s important to understand why the pension deficit is rising so quickly. In this article we’ll give you 3 key reasons — and explain why the crisis is easier to fix than you may think.

Let’s start by looking at…

Freelancers and Informal Workers

In the last 2 decades, hundreds of millions of people have chosen to avoid traditional careers.

In the US, 36% of the workforce is made up of freelancers. In less developed countries like India, where 93% of all workers don’t have contracts, this figure is much higher. Even career-oriented Japan is seeing a dip in full-time employees.

All of this means that there are fewer people locked into long-term pension programs. Some make independent efforts to save for retirement — but many are likely to have no savings as pensioners, placing a strain on the world economy.

That’s reason number one for the growing pension gap. Reason number two is…

More Older People, Fewer Young Workers

In 1901, the average life span was just 46.3 years. In 1937, when the US introduced Social Security, the number was still hovering around 60 years. Today, the number is at 70.5 years.

All of this means people live longer after retiring. It also means that baby boomers are going to place an increasingly large strain on later generations as they continue to age.

This is especially true with fertility rates having fallen by 50% since the 1960s. Today, there are 8 workers for every pensioner. For comparison, the support ratio was 12 in the 1960s — and is projected to fall to 4 by 2050.

This is a massive gap, and unless something changes soon, aging baby boomers will put a severe strain on future generations.

The last reason on our list is…

Poor Management, Broken Promises & Fraud

It’s no secret that pension funds are poorly managed. The proof is in the proverbial pudding. In the US alone, the S&P 500’s pension plans are already underfunded by $382 billion. And with America’s flagship companies doing so poorly, you may well imagine what the situation is like overall.

This figure includes General Electric’s primary pension plan, which covers 467,000 people and is underfunded by over $30 billion. It also includes the United Parcel Service, whose employees won’t get the benefits they were promised if they work past 2022.

And state-run funds aren’t doing much better. Fraud and mismanagement are common there, too. Just last year, New York State’s Common Retirement Fund manager was caught stealing a total $3 billion from the program. Meanwhile, the Illinois Teachers’ Retirement System has $1 billion invested in bonds that Moody and S&P rate as ”junk”.

This is not to paint things worse than they really are. But the truth is that centralized pension funds give their beneficiaries very little control, making poor decisions, broken promises and fraud common.

And that’s the last (and biggest) problem facing pension funds today.