The trash is piling up in Paris, and will likely continue to do so as French President Emanuel Macron’s unpopular power move Thursday to raise the national retirement age from 62 to 64 without waiting for a legislative vote is expected to ratchet up strikes and protests.
Meanwhile, in China this week the state-back Global Times reported the country is planning to raise its retirement age (among the lowest in the world at 60 for men, 55 for white-collar women and 50 for women who work in factories) gradually and in phases to cope with its rapidly aging population.
In the U.S. the retirement age issue is slowly but surely heating up as lawmakers—who have long kicked the can of Social Security’s impending insolvency down the road to preserve their reelection prospects—begin to grasp the reality of the situation and its accelerating timeline.
As Howard Gleckman, senior fellow at The Urban Institute, where he is affiliated with the Tax Policy Center and the Program on Retirement Policy, wrote in Forbes this week, the fundamental demographic problem is the same in many countries across the world: The number of working-age people paying taxes is insufficient to support a growing cohort of retirees. More on that later…
What’s happening in France
While the prospect of raising the retirement age has led to protests and labor strikes in France since mid-January, it really came to a boil Thursday when President Macron took a hard line by invoking a rarely used article in the French Constitution allowing him to push through a bill without a vote in the National Assembly. He did so—deciding to raise the retirement age from 62 to 64—just minutes before the National Assembly was scheduled to take a vote on the bill. The bill had passed the French Senate earlier on Thursday, but would have faced more of a hurdle passing the National Assembly—the lower house of parliament.
The move sparked widespread outrage not only from citizens but also from within the French Parliament. Many lawmakers started singing the French national anthem to drown out a speech by Prime Minister Elisabeth Borne, who defended the decision, saying the country “cannot gamble on the future of our pensions,” amid jeers and chants from lawmakers. “This reform is necessary.”
President Macron claims France’s long-established current retirement age of 62 is unsustainable in a country where the average life expectancy is now 82. Official projections show there were only 1.7 workers for every retiree in 2020, down from 2.1 in 2000. By 2033, there will be just 1.5 and only 1.2 by 2070.
“People know that yes, on average, you have to work a little longer, all of them, because otherwise we won’t be able to finance our pensions properly,” Macron told the Associated Press in February. The bill also would require people to have worked for at least 43 years to be entitled to a full pension.
But polling shows a vast majority of French citizens oppose Macron’s pension reform, as do trade unions, who say there are other ways to tackle the issue, including raising taxes on the wealthy. While the retirement age of 62 is among the younger retirement ages in Europe (more commonly 65), cherishing life after retirement is deeply embedded in French culture, and it is seen as a necessary (and earned) reprieve after a life of hard work.
While lawmakers are unlikely to vote in a majority to dissolve the National Assembly and hold new elections during an expected “no confidence” vote on Monday, labor leaders and political opponents of Macron are calling for more strikes and demonstrations protesting the retirement age change (which would then go to constitutional court and most likely become law).
The news in France comes at a time when some lawmakers in the U.S. have floated the idea of raising the retirement age amid rising concerns about Social Security’s long-term solvency.
Recent forecasts from the nonpartisan Congressional Budget Office show Social Security spending growth rapidly outpacing the growth in federal tax revenues over the next 10 years as Baby Boomers retire and begin to claim benefits.
While people can begin claiming Social Security benefits at 62 in the U.S., research has shown that the vast majority would receive substantially more money over the course of their retirement by waiting until age 70 to claim. Currently, there are no credible proposals to raise the early claiming age above 62, with the focus instead being on raising the full retirement age.
In his Forbes piece, Gleckman notes some key differences between the U.S. and French retirement systems. Notably, French retirees on average receive about 60% of their pre-retirement earnings through the public pension system, while U.S. retirees receive only about 40% from Social Security. But France spends about twice as much on its national pension program as a share of its overall economy than the U.S. does.
But Gleckman also notes that many U.S. retirees also have income from private, work-based pensions and/or tax-advantaged 401(k)s and IRAs that don’t exist in France. While this is especially true among higher-income workers, Social Security remains a crucial source of retirement income for a disproportionately large percentage of retirees, with some reports saying as many as 40% rely solely on it, even though the program was never intended to provide more than supplementary retirement income.
A bipartisan group of senators is holding discussions this year with a goal of recommending changes to bolster Social Security’s solvency. While details remain sketchy at this point, it is widely expected that raising the full retirement age from 67 to 70 will be among the proposals.
That group is not alone. Republican presidential candidate Nikki Haley called for changing the retirement age during a recent town hall meeting in Iowa, and another bipartisan group of senators proposed legislation recently that would encourage more Americans to wait until age 70 to claim Social Security benefits.
Expect to hear much more about Social Security reform proposals throughout 2023, and keep an eye out for the next annual report likely in early June from the Treasury Department’s Social Security Board of Trustees, which will offer the most current projection of when the Old-Age and Survivors Insurance (OASI) Trust Fund will be depleted (which will be in 2034, according to the 2022 report).
SEE ALSO:
• Nikki Haley Proposes Changing Retirement Age
• 4 Senators Want Americans to Wait Until 70 to Claim Social Security
• Bernie Sanders Reintroduces Bill to Increase Social Security Benefits, Extend Solvency
• Pandemic Pushes Planned Retirement Age by 3 Years: Franklin Templeton
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
