Vietnamese people think it is a given that their children and grandchildren will care for them in their old age. However, society has changed. Children move away for work, study abroad, or even settle in foreign countries. The multi-generational family model is gradually fading, while life expectancy in Vietnam has risen significantly.

This means that the period of life following retirement is growing longer, and the cost of maintaining a reasonably stable standard of living during this time is far higher than in the past.

A friend of mine has an older relative, a retired teacher, living in the north. He and his wife had three children: two sons and a daughter. After scrimping and saving to raise them until they all had families of their own, his wife passed away. The two sons lived and built their careers in Ho Chi Minh City. Having sold off his property to support his children, he lived a solitary life in a small apartment, visited occasionally by the daughter who lived in the same city. Then, one day, he suffered a stroke; although he was found in time, he was left with mobility and personal care difficulties. As a last resort, the children discussed the matter and decided to place him in a nursing home. They shared the monthly cost, which was double the amount of his pension.

Whenever my friend visited, he would say: "Living like this, my children feel guilty about me, and I feel guilty about them."

Two women exercises by the Sword Lake in Hanoi, northern Vietnam. Photo by VnExpress/Ngoc Thanh

The issue of pensions being insufficient to cover living expenses is not unique to you or the elderly in Vietnam; it is a challenge faced by many places around the world. Consequently, nations have implemented various policies, programs, and initiatives to supplement, expand, and extend social security provisions for the elderly.

In many developed countries, retirement systems have long since moved beyond reliance solely on state pensions. The U.S. has 401(k) plans - employer-sponsored retirement savings accounts that allow workers to invest a portion of their paycheck before or after taxes; the U.K. has workplace pensions; Australia has superannuation; and Singapore has the Central Provident Fund with its robust accumulation mechanism.

Even Japan and South Korea, countries deeply influenced by East Asian culture, where children caring for aging parents was once considered the norm, are now actively promoting individual retirement savings models in the face of mounting pressure from aging populations.

Vietnam has begun implementing a voluntary supplementary pension fund mechanism to operate alongside the mandatory social insurance system.

Why is this a major change?

Supplementary pension funds are viewed as a way for both employees and businesses to make additional preparations for retirement, rather than relying solely on social insurance pensions. Employees can open personal retirement accounts with their own contributions, while businesses can make additional contributions for staff as a form of long-term benefit.

These funds are managed by professional investment firms, and participants have an additional source of income on top of their basic pension upon retirement.

From a corporate perspective, this model offers several attractive features.

Employee retention has for long been a major challenge, particularly in a fiercely competitive labor market. The most common strategy for retaining staff is raising salaries; however, every salary increase entails not only the direct cost of the pay hike itself but also a host of mandatory associated expenses, such as social insurance, health insurance, unemployment insurance, and trade union fees, calculated based on the salary.

A supplementary pension fund can serve as a smart tool for both human resources and financial management.

Yet, if it were truly that simple, the world wouldn't be grappling with such a headache. Investment management poses an immense challenge for pension funds globally. A strategy that is overly conservative yields returns that fail to keep pace with actual inflation, whereas an aggressive pursuit of high returns escalates risks.

The world has witnessed numerous costly lessons regarding pension funds. One of the most notorious cases is the Enron scandal in the United States in the early 2000s.

Many of the company's employees not only lost their jobs but also saw the bulk of their retirement savings vanish because the fund had invested heavily in the company's own stock.

Among them was Charles Prestwood, a loyal employee who had dedicated over 30 years of service to the company.

Prestwood had poured nearly all his savings and retirement contributions into company stock. At the height of Enron's success, his retirement account was valued at some $1.3 million, an amount more than sufficient to ensure a comfortable and prosperous retirement.

However, when Enron was rocked by the accounting fraud scandal, the stock price plummeted to near zero.

Instead of retiring a millionaire, Prestwood was left with a mere $8,000. When reporting on the event, the U.S. media frequently cited his heartbreaking words: "I had all my savings, everything in Enron stock, I lost $1.3 million. It was from rags to riches back to rags."

No financial model is entirely risk-free. Consequently, financially savvy individuals rarely stake their entire retirement security on a single basket; instead, they combine various sources—such as state pensions, corporate retirement funds, cash-flow-generating real estate, stock investments, life insurance, and personal savings.

The primary value of supplemental retirement funds lies not in making one wealthy in old age, but in preserving independence and self-respect when one is no longer able to work.

Indeed, as businesses begin to re-evaluate their long-term human resources, tax, and benefits strategies in the coming years, the critical question may shift from "How much does this company pay?" to "How much peace of mind regarding the future does this company provide?"

For the individual worker, this represents a starting point, not to replace social insurance, land holdings, or gold reserves, but to add another layer of protection to their social security options.

After all, at a certain stage in life, possibly the greatest source of anxiety is not aging itself but the prospect of growing old with many years of life still ahead and not having the agency to choose the life one truly desires.