With more older people retiring than there are younger ones working, and people living longer in general, governments across the globe are considering raising their retirement ages.
French President Emmanuel Macron’s proposal to raise the retirement age, from 62 to 64 years old, is moving forward without a Parliament vote, moments before the vote was set to happen, the Associated Press reported.
France is the latest country to talk about increasing the retirement age. China is also looking to raise its retirement age, according to a recent report. The U.K. has discussed the possibility of raising the pension age to 68 in the next decade and a half, The Sun reported. And while there is no official retirement age in the U.S., politicians have weighed the option of increasing Social Security’s Full Retirement Age, or FRA, which dictates how much beneficiaries receive every month.
Countries are considering these proposals because there are more retirees than there are workers. In China, for example, the older demographic is rapidly taking over the majority of the country’s population, thanks in part to the previous one-child policy. The U.S. saw a baby boom in the 1940s, but those babies are now in or near retirement.
“If we define old age, we can reduce the number of older people who we have to support,” said Richard Johnson, a senior fellow and director of the program on retirement policy at the nonprofit Urban Institute. “Raising the retirement age would disqualify some people from getting their retirement benefits.”
Essentially, an older retirement age is a benefit cut, he and other experts say. For Americans, it would affect how much beneficiaries receive, whether they claim early or at their full retirement age.
Proponents say it is a way to fix the insolvency issue, since the two trust funds that support Social Security are expected to run out of money by 2035, at which point beneficiaries would see a 20% reduction in benefits.
Social Security’s full retirement age hasn’t been changed since 1983, when the law sought to increase the retirement age gradually for individuals from age 65 to 67. Age 65 was the original full retirement age for beneficiaries, set when Social Security was created in 1935.
During a campaign event, Republican candidate Nikki Haley suggested raising the full retirement age for young beneficiaries in the future, though she didn’t indicate what that age should be.
Countries are seeing fewer workers available to support an aging population. In the U.S. for example, when Social Security was created, there were more than 10 people working to support one retiree, said Joseph Chamie, a demographer and former director of the United Nations Population Division.
That figure is now around 4 workers per retiree, Johnson said, and is expected to drop to 3 by 2033, Chamie said.
China’s workforce is expected to decline for the next seven years, largely in part to the one-child policy the country had for nearly 30 years. The law was an effort to slow the population’s rapid growth rate, but it has had an adverse effect on retirees, now that there are fewer people paying into the pension system. China’s possible retirement age increase would likely be a few months now for those near retirement, and a few years for younger workers, according to the state-backed Global Times.
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Americans traditionally had multiple sources of retirement income, including Social Security but also personal savings and a pension from their companies, Chamie said. Pensions have been widely phased out across the private sector, putting the onus of retirement security on workers themselves. There is a “misunderstanding” people have that they can live off of their Social Security, he said. For many retirees, however, Social Security is their lifeline in old age.
France is facing similar issues — French President Emmanuel Macron said upping the retirement age is necessary for the stability of the country’s pension system and budget. His plan is to raise the age from 62 to 64, though retirees would have had to work for 43 years to receive their full pension. The retirement age would increase slowly until it was fully implemented by 2030.
As in the U.S., not everyone is happy about the idea of an increased retirement age. In the U.K., opponents are pushing for a delay for the year in which the retirement age is increased — 2042 instead of sometime in the 2030s. In France, thousands of French workers have protested, including a sanitation strike going on for 10 days.
“Demography doesn’t care about people’s vacations and retirements,” Chamie said. “The numbers are simply the numbers.”
Source: finance.yahoo.com