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    Home»Monetization»Denmark Raised the Social Security Age to 70. Should the US Do the Same?
    Monetization

    Denmark Raised the Social Security Age to 70. Should the US Do the Same?

    spicycreatortips_18q76aBy spicycreatortips_18q76aJuly 22, 2025No Comments6 Mins Read
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    repair Social Safety is an ongoing query, with quite a few proposed options. In spite of everything, it’s projected to expire of cash in 2033.

    If no motion is taken at that time, the fund will solely cowl 77% of the scheduled advantages. The deficit may find yourself even greater if fertility charges within the U.S. stay low, thousands and thousands of immigrants who pay into the system are deported and life expectancy continues to extend.

    In consequence, assume tanks, non-profit organizations and lawmakers have been providing up a spread of options to deal with the issue. Whereas everybody has totally different concepts on the right way to handle the shortfall, they agree that it must be mounted sooner moderately than later.

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    “We must always do one thing due to the dimensions of the deficit we face,” says Alicia Munnell, a senior advisor on the Middle for Retirement Analysis at Boston School. “The prospect of a 23% profit reduce solely eight years away ought to focus our consideration on restoring steadiness to this system.”

    Just lately, Denmark, which can also be dealing with a shortfall, opted to boost its retirement age to 70, the very best in Europe. Denmark’s present retirement age is 67; it’s elevating it a yr at a time, each 5 years, till it hits 70 in 2040. However what works for Denmark could not work for the U.S.

    What went flawed with the Social Safety belief fund?

    Social Safety will get most of its funding from payroll taxes paid by each employees and their employers. A smaller portion comes from curiosity earned on the belief funds the place these taxes are held. This technique labored nicely till the Seventies and early Nineteen Eighties, when it started operating deficits.

    In 1983, Congress reformed the system by growing payroll taxes and step by step elevating the total retirement age (FRA). This effort was profitable and led to belief fund surpluses that lasted till about 2009, in line with the nonpartisan Peterson Basis.

    The U.S. is once more dealing with an underfunded Social Safety system. Individuals are residing longer, requiring extra years of advantages, whereas the variety of working-age contributors to payroll taxes is not maintaining.

    Is taking a web page from Denmark the reply?

    Many proposals to save lots of Social Safety have been making the rounds, together with following within the footsteps of Denmark, which can also be dealing with a shortfall. In late Could, the nation raised its retirement age to 70, the very best retirement age in Europe.

    Denmark isn’t elevating the retirement age immediately. It’s adopting a phased method to elevating the retirement age, which is tied to will increase in life expectancy.

    Since 2006, it has raised the retirement age each 5 years. Right this moment, the retirement age sits at 67. In 2030, it is going to enhance to 68; by 2035, it will likely be raised to 69. In 2040, it goes to 70 for folks born after December 31, 1970.

    These in favor say aye

    Proponents of elevating the retirement age to 70 within the U.S. argue there are a number of advantages to taking a web page from Denmark, together with the next:

    • It could scale back the shortfall by chopping the variety of years that Social Safety advantages are paid out.
    • It could encourage folks to work longer, which will increase the quantity of taxes collected and cash going into the belief fund.
    • The longer folks work, the extra they’ll probably save for retirement.

    “Retirement at 65 (the common age People retire) made quite a lot of sense when the life expectancy was 61,” says Rob Edwards, managing director of Edward Asset Administration.

    “Right this moment, People reside and actually having fun with life nicely into their 80s. If we don’t replace the retirement age to mirror that actuality, we’ll preserve placing strain on the Social Safety System.”

    Elevating the retirement age doesn’t work for everybody

    Critics of elevating the retirement age to 70 argue that the U.S. and Denmark are usually not the identical, and subsequently, what works in Denmark received’t essentially work right here.

    “We now have a way more unequal society than Denmark,” says Munnell. “We now have a a lot greater poverty fee and far greater unequal earnings distribution fee, so an across-the-board reduce by elevating the retirement age shouldn’t be possible.”

    In accordance with the Organisation for Financial Co-operation and Improvement, the poverty fee within the U.S. is greater than 3 times greater than in Denmark, notes Munnell. That inequality in earnings has a direct correlation with life expectancy.

    Research have proven that individuals who dwell longer are inclined to have extra wealth and are extra seemingly to have the ability to carry out their jobs nicely into their 70s. Decrease-income employees, significantly those that do bodily taxing jobs, usually need to retire early and would face a discount in advantages if the retirement age had been raised.

    A few of these employees shall be pressured to seek out methods to cowl the shortfall, which may imply chopping their finances or downsizing, getting part-time work, or tapping the Social Safety Incapacity Insurance coverage program.

    The latter choice would erode a number of the projected value financial savings from elevating the total retirement age.

    A balanced method could also be so as

    Because of the discrepancies in life expectancy, one resolution is to extend the total retirement age for individuals who can work longer, however preserve it at 67 for individuals who can’t.

    That might imply low earners would retain the present retirement age of 67, whereas it might enhance for prime earners.

    “The underside line is that Denmark’s enhance within the retirement age reinforces the truth that we have to restore steadiness and confidence in our Social Safety program,” says Munnell.

    “However the U.S. can not undertake the identical choices as Denmark as a result of life expectancy and the features in life expectancy differ dramatically by earnings, and our distribution of earnings may be very unequal,” he mentioned.

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