Denmark has a major plan to raise its retirement age to 70 by the year 2040. This plan, approved by the Danish parliament, is making headlines around the world, and now, Americans are wondering: could the US be next?
Denmark’s Bold Plan to Increase the Retirement Age
By 2040, Denmark will raise the official retirement age from 69 to 70. This change is based on a 2006 welfare agreement that links retirement age to life expectancy and is based on the fact that people are living longer and therefore they are expected to work longer.
Ane Halsboe-Jørgensen, the Danish Employment Minister, said, “In 2040, we will raise the retirement age to 70 years to afford proper welfare for future generations.”
This plan has not been welcomed well by everyone, and unions and workers in physically demanding jobs such as agriculture and construction argue that the policy is unfair. 3F, the largest trade union in Denmark, reported that most of its members are uncertain that they will have the physical energy to work until 70.
Denmark’s decision to raise its retirement age reflects a global trend as other countries like Germany, the UK, and the Netherlands are also planning to raise retirement ages to 67 or higher by the end of this decade.
Could the US Also Raise Its Retirement Age to 70?
The Full Retirement Age in the U.S. is currently 67 for everyone born in 1960 or later. However, as the Social Security trust fund is feared to run out by 2033, the idea of raising the retirement age to 70 is back in the spotlight.
Experts warn that if no changes are made to rescue the Social Security fund, benefits may be slashed by as much as 21% starting in 2033. Some lawmakers argue that gradually raising the FRA to 70 could fix the finances of the Social Security trust fund, even though temporarily.
The idea to raise the FRA is not a new idea. In 1983, the U.S passed a series of reforms that raised the FRA from 65 to 67. These changes were made following recommendations from the Greenspan Commission during a similar Social Security crisis.
Due to the longer life expectancies leading to more Americans attaining retirement age, some experts believe that another reform to increase the FRA may be necessary.
Why Raising the FRA Is Controversial
Although raising the FRA might help Social Security to stay solvent, some workers might be impacted negatively. While workers in office jobs may be able to work until their 70s, those in physically demanding jobs such as caregiving, manufacturing, or construction might find it difficult to work in their late 60s or 70s.
How to Prepare for the Change
Even if the U.S. doesn’t raise the retirement age to 70 like Denmark, it is important to plan for the future. Here is some of the advice offered by financial planners:
- Start saving early by building savings in IRAs, 401(k)s, and other retirement accounts.
- Plan your retirement and decide the age you are going to claim your Social Security benefits. It can be as early as 62, but doing so will reduce your monthly payments.
- Plan for flexibility through phased retirement or part-time work if you find full-time work unsuitable.
- Stay informed about future Social Security reforms so that you can plan better for retirement.
Conclusion
Denmark’s decision to raise its retirement age to 70 is part of a global trend. Although the U.S. hasn’t made a similar move yet, Social Security is certainly pressured to do so, especially due to its looming financial crisis. As people continue to live longer and the retiree population expands, raising the retirement age seems like a wise decision.
Whether the U.S. raises its retirement age or not, workers should take control of their retirement by planning for flexibility, saving more, and staying updated about future Social Security reforms.