How Do American Pension Plans Stack Up Against the Rest of the World?
As more Americans work longer and struggle to save for retirement, it makes you wonder how other countries are doing. Have they got it all figured out? Are Americans missing out on a great plan that would provide more security for our seniors? As you’ll find out, there is no such thing as a perfect retirement plan. While some may be a bit better than others, every country has its struggles. Curious about how the U.S. compares to other countries? Here’s a look at a few retirement plans from around the world.
The U.K. put an end to fixed retirement in 2011, preventing employers from forcing their staff to quit just because they were 65 or older. If you’re a male who was born before December 6, 1953, you can begin drawing a state pension at 65, while women born after April 5, 1950, but before December 6, 1953, can also draw a state pension. A new proposal by the U.K. government could increase the pension age to 67, mainly because of longer life expectancies. The U.K. also allows workers to delay claiming their state pension, making some eligible for extra state pension funds or a lump-sum payment when they do decide to claim it. Interested in how the U.K. is doing when it comes to saving for retirement? A 2013 HSBC Bank Survey showed the average retirement savings in the U.K. is about $122,000 for men and $88,425 for women. Those who had financial plans in place and listened to the guidance of a financial planner averaged quite a bit more at $205,213.
Aussies refer to their Social Security program as Age Pension. To qualify, you need to be at least 65 and meet the ten-year qualifying Australian residence requirements, and factors such as income and assets impact how much pension a worker will get. Beginning July 1, 2017, the Age Pension qualifying age will increase to 65 1/2 and will continue to rise by six months every two years, reaching 67 by July 1, 2023. Australian citizens are required to put away 9 percent of their salaries into a superannuation account. A report titled Rise of the Grudge Workforce released in December by Suncorp Superannuation predicts the number of Australians working after age 65 will rise by 52 percent over the next ten years. The Association of Superannuation Funds of Australia calculates that a retiree now needs $430,000, or $510,000 for couples, to enjoy retirement, according to Hub Pages. However, Suncorp statistics show that at least one-third of Aussie baby boomers have less than $100,000 in their superannuation.
A budget deficit caused the Canadian government to announce the eligibility age for Old Age Security and the Guaranteed Income Supplement would gradually rise from 65 years old to 67 by 2029. Canadian citizens who are 65 or older and have lived in the country for at least ten years are eligible for OAS, and pension increases in accordance with the number of years a person has lived in Canada. Recipients of the low-income OAS can draw a monthly, non-taxable benefit from the Guaranteed Income Supplement. Investopedia writes that the OAS payout, on average, is $510.21 a month, and seniors who make less than $69,562 are eligible for the maximum payout of $540.12 a month. Canadian seniors, on average, get $492.26 a month from the GIS. The maximum payout for GIS is set at $732.36 a month for those who make less than $16,368.
A survey titled Melbourne Mercer Global Pension Index ranked sixteen countries in 2011 based on the average of three categories: adequacy, sustainability and integrity. Brazil ranked No. 9 on its list, just ahead of the U.S., with the report stating, “Brazil’s retirement income system comprises a pay-as-you-go social security system with higher replacement rates for lower income earners; and voluntary occupational corporate and individual pension plans which may be offered by insurance companies or employers.” In the 1980s, Brazil introduced what most would describe as a generous government pension system. It’s financed with a payroll tax, causing higher-paid workers to have to contribute more. Brazil citizens only need to contribute for fifteen years in order to receive full benefits at age 65 for men and 60 for women. A man who has contributed to the system for thirty years can retire at 53, while a woman at age 48 can retire if she’s contributed for twenty-five years.
Japan has a three-part system in place. Workers receive a flat-rate pension of about $657 a month from a fund that is partially financed by worker contributions, according to Yahoo Finance. Additionally, they receive a second pension based on earnings that is financed entirely by their contributions. Citizens also have the option to contribute to additional plans that are voluntary, and they can collect the flat-rate pension after contributing for twenty-five years – they become eligible for a full benefit after forty years. Combined, the flat-rate and earnings-based pensions replace only about 25 percent of pre-retirement income.
If you’re an older worker in France, you’ve got it pretty good. The minimum age for a full pension is 62 as long as you’ve contributed to the system for at least 41.5 years. There’s also a tax-funded pension and mandatory employer programs in place. A worker in France who earned a median wage receives 60.8 percent of pre-retirement take-home pay. France recently raised the contribution period to receive a full public pension from forty-one and a half to forty-three years, beginning after 2020, per Yahoo Finance.
Social Security payments are financed by a tax on both workers and employees, with the payment average at $1,269 a month, according to Yahoo Finance. Americans can collect Social Security as early as age 62 but don’t receive the full benefit unless they wait – age 66 for those born from 1943 through 1959 and age 67 for those born after. Many also rely on corporate pensions, but they are slowly being replaced with 401(k) plans, which require employees to save and invest on their own. However, Americans are struggling to save as much as they should for retirement. The Employee Benefit Research Institute released its 2014 retirement confidence report revealing that 24 percent of respondents still described themselves as not at all confident in their savings, with the least confident respondents not having a specified retirement plan.
So, what should you take away from this? No country has a perfect retirement system in place. Those who seem to have more generous plans are worried they won’t be able to fund them, while others are struggling to contribute enough toward their older workers’ plans. There’s no need to pack up and move across the country because there isn’t one that is much better than the rest. Your best bet? Remain proactive, get a retirement account, and save, save, save.
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