Denmark Raises Retirement Age to 70, US Might Follow Suit
In a move that could have significant implications for the US, Denmark has announced plans to raise its retirement age to 70, the highest in Europe. The change, which will apply to public pension retirements starting in 2040, is part of a broader effort to adjust the country’s retirement age to reflect changes in life expectancy. According to CNBC, this change is a significant development in the country’s efforts to ensure the sustainability of its pension system.
The US, on the other hand, does not have an official retirement age. While individuals become eligible for Medicare coverage at 65 and full Social Security benefits between 66 and 67, depending on their date of birth, there is no single, definitive retirement age. However, economists define the retirement age as the age at which individuals can no longer accrue benefits, which in the US is 70. As CNBC reports, Teresa Ghilarducci, a labor economist and professor at The New School for Social Research, notes that “in the United States, it’s been 70 for decades, and we had the highest retirement age than any other country for years.”
There are efforts to officially bump up the US retirement age, however. In 1983, Congress passed legislation to gradually raise the full retirement age for Social Security from 65 to 67, a change that is still being phased in today. More recently, an amendment to raise the full retirement age to 70 was introduced by Sen. Rand Paul, R-Ky., as part of a broader effort to advance legislation that increased Social Security benefits for certain public pensioners. According to CNBC, the proposal would have created nearly $400 billion in savings for the program, but was ultimately struck down.
The debate over raising the retirement age in the US highlights the challenges facing policymakers as they seek to ensure the long-term sustainability of the Social Security program. With the trust funds that support the program facing looming depletion dates, lawmakers may need to consider a range of options, including raising taxes, cutting benefits, or some combination of both. As CNBC notes, raising the retirement age is effectively a benefit cut, and one that could have significant implications for low-income workers who may not have the means to support themselves in retirement.
Denmark’s move to raise its retirement age is not a surprise, experts say. Research published by the Danish Center for Social Science Research in 2023 found that increasing good health and educational resources for 60- to 70-year-olds, along with higher demand for older workers, could point to retirement age increases in the future. According to CNBC, Jesper Rangvid, professor of finance at the Copenhagen Business School and co-director of its Pension Research Centre, notes that the change “sends a signal that this is what the positions would like, that you should work longer.”
However, retirement experts say that raising the US retirement age may not present the same solution for the population that it does in Denmark. The US has a much more unequal society when it comes to income, wealth, education, and life expectancy, notes Alicia Munnell, senior advisor at the Center for Retirement Research at Boston College. As CNBC reports, Munnell argues that “when you have such a big, big difference, any across-the-board increase in the retirement age would be foolish… it’d be immensely harmful to those at the bottom who already receive benefits for a shorter period of time.”
The welfare reform that began in Denmark in 2006, whereby the retirement age increased with life expectancy, has been “extremely important” for the country’s economy, according to Rangvid. Denmark has basically no public debt at all, Rangvid notes, in contrast to the US, which faces high national debt that requires the country to spend more on interest payments than on the military. As CNBC reports, proposals to raise the retirement age in the US could help address the program’s funding issues, but would require careful consideration of the potential implications for low-income workers.
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