Complacent, comfortable and sitting on an economic fault line - that's what I see when I visualize the West. Over the next 20 years as the baby boomers try to retire, the effects of the poor decisions our society has been making over the last 20 years will come back to damage the foundation of our affluent lifestyles. Why?

• Low savings rates - Western economies are heavily skewed to consumption with commensurately low savings rates while the emerging economies are skewed towards capital accumulation and have extremely high savings rates - China saves 40% of household disposable income, the US saves 6%. Only savings can create capital and because of this our capital pool is shrinking while the emerging economies' are growing. Capital, not consumption, drives growth so we should expect growth to continue to slow in the west and continue to accelerate in the emerging world.
• Inflation - The money supply in the west continues to grow more rapidly than any other time in history driven by fiscal deficits, currency interventions and bailouts. Financial assets tend to perform poorly in real terms in periods of high inflation and a large part of western wealth is tied up in these types of investments.
• Debt - Debt to GDP levels are at all time highs and growing. Unfortunately we have borrowed to support consumption so we have not created assets that generate cash flow to service our debts. Our options are tax, repay, default or inflate. Which do you think is most likely?
• Demographics - Aging populations and large unfunded social programs with a diminishing number of workers to pay for them. On top of this we are increasingly competing with younger, well-educated work forces in emerging economies.
• Energy - Western lifestyles are dependent on low cost energy with the highest per capita usage on the planet (think long commutes, large houses etc)

How do you protect your retirement in this environment?

• Protect and enhance your intellectual capital - continually strive to build unique, high value skills otherwise your only competitive advantage in the global marketplace will be price
• Protect the purchasing power of your savings and assets - place a portion of assets away from effects of local currency devaluation and inflation
• Energy price hedges
• Under consume and over-save
• Make demographics your ally and invest in countries that have young populations and high savings rates
• Start now - don't delay and don't rely on the government or house price appreciation to pay for it