In the shadow of the nation's worst recession in a generation, politicians have been debating over whether the U.S. should bump up the nation's retirement age. Currently, the retirement age is 65 for people born before 1960 and 67 for people born in 1960 or later. However, American workers can start collecting reduced Social Security benefits as young as 62 and receive full benefits at 66. Some argue that we should boost the retirement age to 70 and others say we should increase it as high as 77 years old. (Nervous about retirement? Check out 50 Years Old And Broke: Now What?)
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Uncle Sam's Aching Budget
Why would the government want to keep us in the workforce later? First of all, Americans are living longer, so many experts argue we should be working longer, too. Estimates show there were 37 million Americans age 65 and older in 2006, but researchers predict that number will skyrocket to 71.5 million by 2030, according to the report Older Americans 2008: Key Indicators of Well-Being. Average life expectancy in the U.S. reached 78 in 2009, a record high level. However, many critics warn that these estimates can be misleading because many inconsistencies remain between genders, age brackets, income levels and racial groups.
Secondly, increasing the retirement age could help the country save some big bucks. And we all know that the government is struggling to balance their massive checkbook right now. If they were to increase the retirement age, not only would more workers pay into Social Security for longer, but the country won't have to spend as much money caring for retired seniors. The Congressional Budget Office says raising the full retirement age by 2020 would save the country $92 billion. (Retirement isn't the end of your financial journey. Find out more in Retire From Work, But Not Personal Financial Planning.)
Maybe we can learn a few lessons from these five countries that have already raised their retirement age or plan to do so in the near future:
Most countries consider the "working population" as people between the ages of 15 and 64 - but not Taiwan, where everyone older than 15 falls into the working segment. Taiwan jacked up its mandatory retirement age for insured workers from 60 to 65 back in 2008. It was the first time the country had increased the retirement age since 1984.
Since the change was made, the country has fewer issues when it comes to taking care of their aging population. It's probably no coincidence that Taiwan's set a record in the first quarter of 2010 when the country's economy grew at the fastest annual rate in more than 30 years. To top it off, employment in Taiwan grew by 0.3% this April.
In an effort to slash their deficit and tackle an unruly pension system, France is boosting its retirement age from 60 to 62. The country's new retirement age will take full effect by 2018.
The new plan, which also includes higher levies on capital gains, stock options and other investment income, has been heavily criticized by national trade unions. However, Labor Minister Eric Woerth forecasts that the changes will result in balanced pension accounts by 2018 and a 100 million euro surplus by 2020.
Even with the age hike, France will still have the lowest retirement age in the developed world.
This June, the British government announced they too have plans to increase the U.K.'s retirement age and reform pensions. The pension age is currently set to rise from 65 to 66 by 2016 and up to 68 by 2046. However, more recently, the U.K. government revealed that the retirement age could jump as high as 70.
Although U.K. unions and charities are attacking the new plans, British politicians say the increase is necessary due to a neglected pension system and ever-increasing life expectancies. The U.K.'s current life expectancy is 77 years for men and 81 for women.
In 2007, the German government voted to gradually raise the nation's retirement age from 64 to 67, starting in 2012. The country's incredibly low birth rate and aging population played a major role in this decision. While Germany has one of the lowest birth rates in Europe, the country's 65+ population is estimated to double by 2035.
Greece is also planning to bump up the country's official retirement age from 61 to 63 by 2015. Like many other flat broke countries, the Greek government is making the change in an effort to balance its budget and save the nation's pension system. Labor Minister Andreas Loverdos claims the pension system will be drained in five years if the country doesn't make the changes.
Greece, which has been devastated by a national debt crisis, has even considered banning early retirements altogether. Like citizens in Germany, France and the U.K., Greeks are furious and many workers are vehemently protesting the controversial plans.
Join the Crowd
In addition to these five countries, Spain, Italy and a few other European nations are following the increased retirement age trend, but the U.S. hasn't jumped on the bandwagon - yet. Although most of us would rather spend our 67th birthday relaxing on the beach instead of clocking in for the umpteenth time, there could be some valuable economic benefits to boosting our nation's retirement age. On the other hand, many critics point out that we shouldn't sacrifice our quality of living just to help Uncle Sam balance his budget. (Find the answers you need in 10 Common Questions About Social Security.)
Catch up on the latest financial news; read Water Cooler Finance: Shocking Court Rulings, Sinking Markets.