When the first retirement age was set at 70 back in 19th-century Germany, the average life expectancy in many European countries was less than 42 years. In 1916, the age was lowered to 65 and has remained relatively stable across developed nations ever since.
Driving the news: These countries are now struggling to pay pensions as life expectancies soar above 80 years. This week, China became the latest country to raise its retirement age and announced plans to increase the required contribution period to its pension system.
- Chinese men and women had been stepping back from work as early as 60 and 50, respectively, but the new retirement age is now 63 for men and 55 to 58 for women.
Why it matters: Young people will probably have to work longer than their parents as countries look to address the rising number of retirees relative to the working-age population supporting them. The UN projects that 31% of China’s population will be above 65 by 2050.
- In Canada and the U.S., the problem is less dire but worsening by the year. By 2051, Statistics Canada projects that 25% of Canada's population will be 65 and older.
Bottom line: In the U.S., that number is closer to 23%, but the country is on track to run out of money to fully pay beneficiaries by 2034 unless there’s an overhaul of the system. Raising the retirement age is an incredibly unpopular fix, but it might become a necessary one.—SB