This article examines China’s retirement age hike sparks urgency: 5 critical fixes the U.S. retirement system needs now. If you wish to check out our detailed analysis, you may go to China’s Retirement Age Hike Sparks Urgency: 8 Critical Fixes the U.S. Retirement System Needs Now
5. More Immigration
While many Americans won’t like the sound of this, America needs more immigrants to keep its labor force from shrinking. Back in 1960, an estimated 5.1 workers were supporting each person receiving a Social Security check. As of 2022, that ratio stands at 2.8 workers per beneficiary. That said, the current level of payroll taxes is insufficient to keep the program afloat. Longer lives, an aging population, a shrinking workforce, and slower birth rates have all come together to form a looming retirement crisis. According to a 2023 report from the SSA, the Social Security program can stay solvent for longer if more immigrants keep coming in. Retirement is very far away for these immigrants who come in young and work longer.
4. Encouraging Population Growth
While China’s one-child policy is responsible for its low birth rate and its ultimate retirement reforms, the declining birth rates in America are largely due to social and economic reasons. Women in the country are more motivated to establish their careers, delaying family planning in the process. Rising costs of living, lack of paid family leaves and other family-friendly policies are further leading to failing fertility levels in the country. Offering economic policies to American citizens such as affordable housing, subsidized childcare, and similar incentives will in turn encourage Americans to start family planning.
3. Incentives for Late Retirement (Additional Incentives)
While the Social Security program already provides higher Social Security payouts to those who wait until the age of 70, it isn’t apparently enough. Many seniors think they won’t be able to survive by that time or are already in need of retirement funds due to a lack of savings on their end. This is why additional incentives—such as further tax breaks, enhanced pension contributions, or healthcare benefits—could encourage more Americans to delay retirement.
2. Extending the Years Required for Social Security Eligibility
Beginning in the year 2030, the Chinese would have to contribute more to the Social Security system to receive pensions. A total of 20 years of contributions will be required by 2039. Similar to the move, the US should also consider raising the number of years individuals contribute to Social Security to be eligible for full benefits. Raising the retirement age and extending years of work can be a potential solution to the insolvency challenge that the program is facing. Even BlackRock, Inc. (NYSE:BLK) CEO Larry Fink agrees, stating that the US’s current retirement age is a bit “crazy” given the current circumstances.
“Think about someone who was 65 years old in 1952, the year I was born. If he hadn’t retired already, that person was probably getting ready to stop working. But now think about that person’s former colleagues, all the people around his age who he’d entered the workforce with back in the 1910s. The data shows that in 1952, most of those people were not preparing for retirement because they’d already passed away”.
-BlackRock, Inc. (NYSE:BLK) CEO wrote.
1. Gradually Raise the Retirement Age
Social Security benefits can start as early as age 62, but the full retirement age for those born in 1960 or later is 67. Today, the life expectancy at birth is in the late 70s, around 77 years. When the Social Security program was enacted in 1935, life expectancy at birth was approximately 61 years, while the eligibility to retire was 65. As of today, things need to change urgently for the program to keep solvent. Social Security funds are at stake due to shrinking workforces and an ever-aging population, similar to China. Just like China’s incremental retirement age is designed to address this growing imbalance, the US needs to do the same. A gradual rise in the retirement age can help the system adjust slowly, all while giving future retirees sufficient time to plan their future.
Check out our complete analysis here: China’s Retirement Age Hike Sparks Urgency: 8 Critical Fixes the U.S. Retirement System Needs Now
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