There seems to be an ever increasing number of news articles about pension deficits and the fact that people will no longer be able to retire at the ages they traditionally could.
France is having problems at the moment trying to raise the retirement age.
Would it be a good idea for people to work progressively less as they age?
So, just as an example:
From 60 you would work four days a week.
From 65 three days a week
From 67 two days a week
From 70 one day a week
And from 72 you retire.
Of course, it could be handled on an hours per day basis as well as on days per week.
Obviously this would not be the easiest thing for small businesses with only a couple of employees to handle so there would probably need to be exemptions.
Your implementation is ass-backwards. The variable the government has control over is when you start getting paid the pension, not how many hours you’re allowed (or required) to work. If you wanted to do this, you’d do it by giving less money to people who retire early, scaling up to the full 100% at the new desired retirement age.
If the current retirement age is 60, and as soon as you retire after that you year you start earning 100% of your pension, you might instead make it so that a 60-61 year old who has retired gets 25%, a 62-63 year old who has retired gets 40%, and so on until a 70 year old gets the full 100%.
There should not be a pension deficit in the first place, if the company was on the up and up. A worker should not have to suffer because some corporation is too stupid to plan correctly.
Working until 72? Are you kidding me? May work for some, not me.
The problem with pensions is that people are living too long. 100 years ago, no one had any idea of such a thing as retirement as we understand it. You worked as long as you could. The problem was what happened when you no longer could, and this is where pensions came in. What happened is that people got healthier and life expectancies got longer, so the pension system gradually evolved into an extended vacation “golden years” concept. Which is nice if you can afford it, but …
The proper approach is raising the retirement age. The idea is that the percentage of a person’s lifetime that they work should be relatively fixed. And the number of active employees per retiree should also remain relatively constant. The variable is the retirement age.
[These two don’t always move in tandem, in places with low birth rates. This is a big part of the problem in Europe.]
But rather than simply raise the retirement age, wouldn’t it be better to phase out working over a number of years so that people worked the required proportion of their lives but wound down rather than suddenly stopping?
By “progressive”, I thought the OP was going to suggest something like:
Current retirement age: 65.
Will increase by one year every three years until it reaches 80 or Congress modifies the legislation, i.e. in 2013, it will be 66. In 2016, 67. In 2019, 68, etc. Someone who is now 40 can expect to draw SS in 2046, at the age of 76.
If one-per-three is too slow, I can imagine one-per-two or two-per-five. Something as gradual as possible to avoid screwing up people now 60+ who have budgeted to retire shortly.
Impractical from a workflow standpoint. Some people pull it off here and there. But it’s not reasonable to assume that millions of semi-retired people will all do this.
Can’t address how much of a problem this is with all pensions schemes, but in the case of Social Security, while the amount of time people live has grown somewhat, GDP has grown faster so that each person today draws out a smaller amount in terms of US GDP over their lifetime, despite their lifetime being longer. Increased individual payouts due to longer lives aren’t the cause of projected deficits in the program, the decreased birthrate (and projected decrease in the birthrate, since the deficits don’t actually materialize for another few decades) are.
With private pension funds (and other gov’t pensions) my understanding is that the projected shortfalls are from a mixture of mismanagement and the fact that even well managed funds lost a lot of money during the recession.
I don’t think the amount that each person draws as a percentage of the GDP is a valid ratio. You can point to the combined amount that everyone on SSI draws as a percentage of GDP (I don’t know how that number has moved over the years, but I would tend to assume that it’s gone up a lot, per my earlier comments.) But citing to each individual person just ignores the growth in the number of people on SSI relative to GDP, which is precisely what is derived from the increased longetivity that I cited.
Sometimes people do it by stepping down involvement with their current job. It’s easier to do this if you own the business, or if you have expertise or experience that allows tyou “retire” and then come back two or three days a week as a “consultant”. Not so much if you in a managerial position; the team you manage will need you to be there when they’re there. You may be able to negotiate a move sideways to a less hands-on role, but that depends on how much your employer loves you and wants to keep your services even on a part-time basis.
It’s probably more common to retire from one job, and then take up a quite different, part-time and (ideally) low-stress job.
(Part of) the idea, obviously, is to reduce the rate at which you deplete your retirements savings. (There is also the desire to retain the personal and social advantages of working - a sense of fulfilment, social interaction, a structure to life.) You may arrange a reduced pension payment now (and a higher payment in later years) or you can simply bank part of your pension, and draw down on it later, when you have ceased all work.
As more people do this, pension systems will develop ways of accommodating them. Here in Australia the superannuation tax legislation has already been amended to accommate the idea of people drawing on their retirement savings while still employed to some extent, to facilitate precisely these patterns of work.
We really aren’t living much longer. Life expectancy at 60 has gone up about 1 year every decade, so a 60 year old now lives 6 years longer than they would in the 1940s.
However the social security tax rate is about 6x higher than it was back then, and retirement age is already 2 years older. So people are paying 6x more in taxes for an extra 4 years of social security benefits.
Raising the retirement age has a whole host of problems too. It pushes younger workers out of the job market, lowers productivity in some jobs, would increase disability and possibly health care costs, etc.
There are tons of things other than raising retirement ages that will work. You can lift the cap on social security, grow the economy faster, reduce income inequality (so more income goes to people earning less than 106k a year, which will increase SS taxes), etc.
Cutting benefits and raising the age are just 2 of the several options to keep the systems solvent.
Everybody is not an office worker. There are plenty of people doing physical jobs that can not be done by a 70 year old. If they are office workers ,they will have difficulty keeping up with new technology. They may be less valuable because of it. They are farther and farther from their school days.
Earlier retirement will help the unemployment problem. It will be a continuing problem so we should be pushing to lower retirement age, not raise it.
Can you imagine a 70 year old walking on iron rails erecting a building? They need earlier retirement.
If we assume that most people have always lived to receive at least one SS check (and that seems to be the case going by Wesly Clarkes numbers, average life-expectancy has been over the retirement age since the 40’s) and as I said the payout per person who reaches SS age has fallen even as the time they spend collecting benefits has increased, then having more people on the roles due to increased life-expectancy won’t negatively affect the solvency of the system. The reason is that its not really per-person in the system, its per-person entering the system. Once your there, it doesn’t matter how long you hang on.
The only thing that matters is the number of people that live to collect that first check and enter the system, and under the assumption that most people have always made it to at least the first year of their retirement, the driving factor of how many people are getting that first check is the birthrate 65 years ago.
The op referred to France so the question is not retirement programs but social security programs. And yes, people shouldn’t have to suffer because some politician outspend the tax money available. Welcome to 12 trillion reasons why they should be in prison for fiduciary malfeasance.
I simply pointed out France as an example because I read a story from there on the day I made the OP.
The question is general, and not based on any particular country or economic system.
I wanted to explore whether people thought it would be better, generally, or in some cases, to wind down from work rather than cease abruptly.
It could just as easily apply to a closed system of a family of several generations running a self sufficient farm (where I’m pretty sure the wind down approach would be universal) as it would to more normal modern employments.
I agree, I had a temp job in a factory and a lot of these 50+ guys WANT to work. They show up and really try, but they are not fast enough anymore to keep up with an assembly line. So they don’t get called back often.
Which is a shame as these guys WANT to work, they show up, they are ready to go.
OP, what makes you think that most businesses want people who came in only one or two days a week? If I came in only one day a week my productivity would reduce 20fold, between remembering what I was working on, figuring out what happened in the meantime, and every day being friday.