Retirement age is rising globally - July 08, 2018
Russian government announced that they are planning to raise retirement age significantly in the near future. The idea had repercussions, but the phenomenon of raising retirement age is far from unique. The same thing happens around the globe. This alone, however, might not be enough and people will have to start saving better.
During the World Cup, Russian government announced that it wishes to raise retirement age for men by five years and for women by eight. This would mean 65 and 63 respectively, which would be closer to the developed countries’ current numbers.
Russia’s problem is a global problem
The news of the change didn’t make everyone happy, but the raise seems inevitable. Pension systems are heading toward a crisis around the world, and the only thing that governments can do against it is to raise retirement age. Why? Because the reason of the crisis is closely connected to age. Pension systems were designed decades ago and since then life expectancy skyrocketed.
According to World Economic Forum’s data, the global population over 65 (which is the age of retirement in many developed countries), is now 1.5 billion, but by 2050 it will be 2.1 billion. This also means that now there are 8 workers to support every retiree but by 2050, there will only be 4. This has to change in order to keep systems going. Since current workers’ taxes pay for state pensions, if active workforce is slim, pension can’t be sufficient either.
Retirement age is going up everywhere
The changes aren’t only affecting Russia, far from it. Countries around the world are raising retirement age gradually. Germany, for example is set to raise age to 67 by 2029. Denmark will do the same by 2022, and they aren’t planning on stopping there. Australia will reach the same age by 2023, while Austria is planning to equalize retirement age for men and women by 2033.
Some studies also show that there may be even more serious hikes. As BBC wrote about the UK: “A report for the Department for Work and Pensions earlier this year has suggested that workers under 30 may not get a state pension until they are 70”. As for their plans now, pension may rise from 65 to 68 by 2046.
Self-care is the way out
We always say that the solution for individuals would be to start savings as soon as possible, and to have better financial self-care. We can’t change what happens to pension as a system, but we can prepare ourselves the best we can. Sometimes saving isn’t even as hard as it first seems: 2 years’ salary can be saved in 10 years with ease.
Jacques Goulet, who worked with the WEF on the report, seems to agree with us. He just told BBC that "There is no one 'silver bullet' solution to solve the retirement gap. Individuals need to increase their personal savings and financial literacy, while the private sector and governments should provide programmes to support them".
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