Is It Time to Increase the Retirement Age?
Joseph Chamie, an independent consulting demographer and a former director of the United Nations Population Division, says the Potential Support Ratio (PSR), or the ratio of the working-age population, ages 15 to 64, per one person 65 or older, “may signal economic stress with more elderly depending on fewer young workers to keep the economy humming.”
In a Yale Global Online article, Chamie reveals that the current PSRs for the older industrialized countries are typically less than six, with the U.S. PSR around 4. He notes that government pension programs typically set a normal retirement age above life expectancy. For example, in 1935 the United States established its Social Security program with a normal retirement age of 65, about three years beyond U.S. life expectancy at that time. In addition, he notes, even though women have a longer life expectancy than men, the standard retirement age is the same for both men and women.
But, two factors have changed, Chamie says: over the past 50 years the world’s average birthrate declined from 5 to 2.5 births per woman within more than 80 countries, and global life expectancy at birth has increased from 47 years in 1950 to 71 today. By the year 2050, the PSR for the developed countries is projected to fall to two working age people per elderly person, Chamie says.
His analysis suggests that to maintain the current PSR, the retirement age would need to be increased by 2050 to as high as 80 in some countries. A retirement age of 72 would be needed in the U.S.
The implications of increasing lifespans and potential insolvency of government pension programs, as well as increasing health care costs and employees being asked to take more responsibility for providing their own retirement income, have many workers planning to work past normal retirement age. However, that plan doesn’t pan out for some, who may have to stop working for health or other reasons.
“[P]opulation aging raises critical questions about the viability of pension systems and health services for the elderly. As is often the case when confronting slow-moving, yet momentous demographic trends, some governments defer addressing the consequences to others in the distant future. Long postponements, however, increase the difficulty and costs of implementing policy steps necessitated by population aging,” Chamie writes for Yale Global Online.
« A Plan Sponsor Uses an RFP Service to Find an Adviser