Raising Retirement Age
I read an article called Raise Retirement Ages By Joseph Chamie, that started with this “Raise retirement ages! That’s the simple, clear and unavoidable message that economics and demographics are sending to governments around the world.”
The author goes on to give some interesting ideas on why raising the retirement age is better for pension funds, current workers, and retired persons. He argues that postponing decisions on raising retirement ages creates financial difficulties for governments, economic uncertainties for financial markets and investors, and worrisome anxieties for workers and families.
He goes on to say that Raising the statutory retirement age bolsters government pension programs by reducing the total outlay of benefits and encouraging men and women to work longer. It also increases the size of the country’s labour force and reduces the size of the retired population.
Moreover, working longer enhances a person’s potential retirement finances by generating more retirement savings and reduces the number of years spent in retirement. It also plays an important role in keeping elderly persons active, mentally engaged and contributes to slowing down the rate of cognitive decline in old age.
He argues that the age at retirement for both women and men should be gradually raised to 70 years, without early retirement at reduced benefits. He chooses 70 because today the average person aged 70 is expected to live for another 14 years and by 2050 a person aged 70 will live until they are 90.
He reminds us that the earliest national pension programs were typically greater than life expectancies at birth. Germany, which was the first nation to adopt an old-age insurance program in 1889, lowered the retirement age from 70 years to 65 years in 1916, well beyond the life expectancy at birth at that time.
He dismisses alternatives to raising the retirement age including increasing taxes on workers and the wealthy, reducing pension benefits and readjusting national government budgets. The reason he dismisses the ideas is that these policies are opposed by various sectors of society. Vocal parts of the public can be expected to object, protest and even strike against even relatively small increases in the statutory age of retirement.
The reality is that while the average age when people actually retire is often lower than the statutory retirement age, the average age at retirement is no less than several years earlier than the official retirement age. So, the fact is that we as societies are moving toward earlier retirement as governments try to increase our retirement age.
A typical retirement age, considerable variation exists across countries in the proportion of the population remaining in the labour force. For example, some countries have a sizeable percentage of their populations aged 65 years and older in the labour force, such as South Korea (35 percent), Iceland (32 percent) and Japan (25 percent). In contrast, many countries, especially in Europe, have relatively small percentages of their elderly population remaining in the labour force, including Spain (3 percent), France (3 percent) and Italy (5 percent).
Raising retirement ages from approximately 60 years to 70 years would increase the proportion of the population who would remain in the labour force as well as reduce the proportion of those who would be eligible for retirement benefits.
Simply raising the retirement age from around 60 years to 70 years would not only increase the size of the labour force, but it would also substantially reduce the size of the retired population receiving government-sponsored benefits. Retirement programs run by the government are designed to replace between 25 and 35% of a worker's income before retirement. Many workers continue to stay in the labour market to help make ends meet. Raising the retirement age is cruel to those who cannot continue to work and those who have to care for others who have chronic illnesses. A better approach is to provide alternatives so that people can save for retirement themselves. This can be done in many innovative ways and would help our economy more than having workers between 60 and 70 who do not want to work continuing to take jobs away from younger workers.
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