Demography has dealt U.S. policy-makers an easier hand, but they’re playing it worse than their international peers.
Timothy Taylor has a blog post at Conversable Economist helpful for framing the conversation about retirement ages and entitlement programs. With French president Emmanuel Macron facing protests over raising his country’s retirement age from 62 to 64, and the United States facing Social Security and Medicare insolvency, it’s worth looking at the facts.
The OECD tracks the average age of retirement and the expected number of years in retirement for member countries. Some stereotypes are true; others are not. First, it is true that Americans retire later than most Europeans. For the U.S., the average age of retirement is 64.9 for men and 64.7 for women. In the U.K., that’s 63.7 and 63.2; in Italy, 62.3 and 61.3; in Greece, 60.9 and 58.1. France is also on the low end, at 60.4 and 60.9, which helps explain the resistance to Macron’s plans. While 62 might seem low already, the average French person retires roughly a year and a half before then.
The stereotype of hardworking Japan is also reflected in the average retirement age of 68.2 for Japanese men and 66.7 for Japanese women. South Korea is also ahead of the U.S., with an average retirement age of 65.7 for men and 64.9 for women. But Sweden, too, has higher average retirement ages than the U.S. (65.8 and 64.9), and Norwegian men retire on average at exactly the same age as American men, 64.9. The stereotype of Scandinavian welfare states subsidizing early retirement isn’t true.
The expected number of years in retirement arguably matters more from a public-finance point of view. The expected number of years in retirement for women is in every country longer than the expected number of years in retirement for men, reflecting women’s longer life expectancy, and, in most countries, their earlier average age of retirement.
Greeks not only retire early, but also live a long time, with an expected 23 years in retirement for men and 28.4 for women. The latter number is the highest of any country tracked. France is similar, at 23.5 years in retirement for men and 27.1 years for women.
American men are only expected to have 18.6 years of retirement, which is the third lowest gender–country pairing, after Japanese men (17.8) and South Korean men (18.4). American women are expected to have 21.3 years. These U.S. numbers are similar to Sweden’s, where men are expected to have 19 years of retirement and women are expected to have 22.1.
The retirement age in the U.S. has not steadily declined over time, as one might expect. Taylor writes:
Over time, the average age of retirement in the US has followed a U-shaped pattern over last 50 years, first dropping by about three year and then rising back close to the earlier level. For men, the OECD data shows that average age of retirement for men was 65.5 years in 1970, 63.8 years in 1980, 62.4 years in 1990, 62.5 years in 2000, 62.9 years in 2010, and then 64.9 years in 2020. For the expected time in retirement, the US follows shows a substantial rise from 1970 up through 2012, but a gradual decline since then. For men, the OECD data shows 12.8 years of expected retirement in 1970, 15.0 years in 1980, 17.0 years in 1990, 18.2 years in 2000, 19.6 years in 2010, and then–after peaking at 20.1 years of expected years of retirement in 2012–a gradual decline to 18.6 expected years of retirement in 2020.
This should be good news for Social Security. If people don’t retire sooner as time goes on, and the number of years people are expected to have in retirement declines or holds steady, it should make the math easier.
But the U.S. retirement system got a C+ from the OECD, alongside France and Spain, countries where people retire much earlier and stay retired for much longer than in the U.S. That’s not primarily because the U.S. is less generous. Taylor notes that the U.S. scored fairly well on the adequacy of benefits but was dragged down by sustainability and integrity measures. Iceland, the Netherlands, and Denmark got an A. Israel, Finland, Australia, and Norway got a B+.
That Social Security scores worse than systems in countries with more-difficult actuarial problems does not bode well. Demography has dealt U.S. policy-makers an easier hand, but they’re playing it worse than their international peers.