When It Comes To Retirement, How Does The U.S. Stack Up Against Other Countries?

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The retirement age has been going up around the world, and in Europe it's mainly because the population is aging while the birthrate in many countries is falling.

A quarter of the population in Japan is over 65, and although the retirement age is 60, people live longer and stay healthier than people in the United States, and one in five seniors continue working in Japan.

Here & Now's Jeremy Hobson speaks with economics professor Arie Kapteyn about how retirement in the United States compares to retirement in other countries.

Interview Highlights: Arie Kapteyn

Which countries are raising the retirement age and why?

“Pretty much every country. Definitely every country in the developed world. And the reason is the same as in the U.S.; people are getting healthier, they live longer. Therefore, they need to be supported for a longer period and at some point, that just becomes unsustainable. And then there’s really two ways one can deal with it. One is to cut benefits, and the other one is just to ask people to work longer, which really comes down to the same thing.”

What is the range of retirement ages in the world?

“There’s really very little variation at this point. It used to be a little more variation but, by and large, all developed countries have something on the order of 65 to 67. Some have plans to go further, sometimes the retirement age is related to life expectancy in a country so the idea is if the country lives longer on average, then the retirement age will go up. But the retirement age really is not all that important, what really matters is everything around it.”

Are countries with higher retirement ages in better fiscal health that those with lower retirement ages?

“Yes. That’s also why you see all these changes in policy. Until about the mid-90s, around the developed world you saw that, since the second world war, people retire earlier and earlier. And at some point, it became clear that this was really not sustainable in the long run and then you saw gradually countries changing retirement provisions, not just retirement age, but other benefits, and it has had an enormous impact on the financial stability of countries. Many countries are not there yet, they probably have to do more, but if they hadn’t changed they would be in so much worse shape than they are now.”

How does the Social Security system in this country compare to the government-funded benefits in countries around the world?

“It’s actually not all that different, I don’t think. You have to keep in mind that Social Security is only one of really three major sources of income in retirement. There is the private pensions, the occupational pensions that are paid for by employers. There's private savings, people can save for their own retirement. And of course, increasingly, people work in retirement. What used to be called retirement after 65, after 67, is now a period in which people keep working, so if you look around the world and you, for example, compare the income of people over 65, on average, they’re not very different. What is different though is the composition of these incomes. In some countries, like France, pretty much all the income after 65 comes from the government. If you look at the U.S., then something like 30 percent on average comes from work, so people are still working.”

For those who keep working after 65, are they happy?

“Well, as a matter of fact, there’s quite a bit of research that people have done on this. You could sort of think of two mechanism. One is, ‘Now I’m retired, now I can do whatever I like, I don’t have to face my boss anymore, it’s all great.’ Of course, the other story you can tell is, ‘Well, now I’m by myself, work was everything for me, now I’m lonely, and I’m depressed.’ Both things are found but, on balance, I would say that probably people on retirement are on average a little happier than people who are working.”

Is it true that younger people have a harder time getting jobs when older workers take longer to retire?

“There’s sort of two things that can be said about it. So, first of all, this notion that old people keep the work that really younger people should have now has been around forever. Economists often refer to it as the ‘lump of labor fallacy,’ which already tells you that economists don’t think that mechanism really exists. It doesn’t mean that it’s never true and Spain is an example of a country where there is a big distinction between what’s called the insiders and the outsiders. So you have the people who have the job, they’ve had the job forever, they’re protected. If the company gets in trouble, the old people are protected, the young people are being fired. If they hire young people, they get temporary contracts. So, in some countries, there’s definitely an aspect of differential treatment of younger and older workers.”

Is there a country with much greater interest in saving for retirement than spending?

“I'm pretty sure that must be Japan. I remember a number of years ago attending a conference and someone reported findings from a survey in which they had asked in a number of countries what their hobbies were and, apparently, among the Japanese, saving was one of the main hobbies.”

Is there a country that’s the opposite?

“I wouldn’t know, but if you just look at when people retire, how they value leisure, then I would think France might be a good candidate.”


  • Arie Kapteyn, professor of economics at the University of Southern California.

This segment aired on April 1, 2016.


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