In case you have missed the news about France and its retirement changes, there has been a lot of discussion lately about rethinking the “official” retirement age all around the world. Usually, this has been presented as a way to save government’s money….the longer one keeps working, the more time the government…or the pension…or the entity that will provide financial aid in the future…will have time to save for the inevitable. If one keeps working until 67 instead of 65, for example, that is two more years that your investment or your pension can grow without withdrawal, and with your continued contribution.
This is not necessarily a new response brought about because of the current US recession. Years ago the Social Security age was boosted to 65.6, then 66 and then 67. Right now, for someone born in l960 or later, Social Security does not kick in until age 67. There is even talk about pushing the official age to 70 or beyond.
Why now? One thought is that since we are living longer, we should be working longer as well. As life expectancy increases, there is concern that there will be millions of people over 65 who will be depending on Social Security and other benefits to keep them solvent.
By working longer, we pay into Social Security longer and this helps governments balance their books. Money coming in rather than going out sounds attractive to numbers crunchers.
So how has this worked elsewhere? In Germany, the retirement age was gradually raised from 64 to 67, which goes into effect in 2012. Germany has one of the lowest birth rates in Europe, but a growing aging population. In Britain, they are raising the pension age from 65 to 66 to take effect in 2016, and there is talk of raising the age to 70. Not surprisingly, unions and charities oppose these plans, but the government blames increasing life expectancy and a neglected pension system.
Taiwan took a huge leap in 2008, moving mandatory retirement from 60 to 65. The result? Taiwan’s economy actually grew at its fastest rate in 3 years.
As for France, they merely want to reduce their national deficit and have pushed retirement from 60 to 62, to take effect in 2018. Rejected by unions and pensioners themselves, the government there says this will result in balanced pension accounts and other benefits. Still, at 62, France will have the lowest retirement age among the developed world.
The solution? Make sure you have enough savings to keep you going after your retirement…and then you will have a choice as to what age is best for you