When will you get to retire?

france_protest.gi.top.jpgUnion workers strike last week in Paris to protest a pension overhaul, which includes a proposal to increase France's retirement age to 62 from 60. By Jeanne Sahadi, senior writer

NEW YORK (CNNMoney.com) -- Trying to reform retirement benefits has long made for combustible politics in Washington. Europe is no different.

Today many debt-burdened European countries as well as the United States are considering raising the age at which retirees can collect partial and full pension benefits. Not surprisingly, the fur has already begun to fly.

"It's always very difficult, and it can take years to make changes," said pension expert Estelle James, who is a consultant to the World Bank.

Retirement ages vary between countries. While many have set 65 as the official age at which one can collect full benefits, some places favor an earlier break from the rat race.

Some groups of workers in Greece are now able to claim benefits in their 50s, while the retirement age for everyone else is 60 for women and 65 for men. A planned overhaul of the system would change all that.

Greece, as part of its broader austerity plan, has committed to bringing the minimum early retirement age up to 60 for everyone. And pension benefits for many will be reduced if they're claimed between 60 and 65.

In France, 60 is the kick-off point for most people to collect full pensions if they've worked 40 years. Those who started work in their teens can collect benefits as early as 56. But there is a proposal to raise the age to 62. French unions last week expressed their displeasure with the idea in a nationwide strike.

So chances are they won't like hearing this: 62 may not be enough for the long run.

In Europe and the United States, life expectancy and time spent in retirement have been increasing, while fertility rates and the number of workers paying into the social security systems have been falling.

"Not only are people living longer, they've been retiring earlier," said John Turner, director of the Pension Policy Center.

In the late 1960s, men in Spain spent less than 10 years in retirement; now they spend more than 20, according to data compiled by the OECD and the Economist. In France, the time in retirement has risen from 10 years to almost 25. The jump in the United States is also large but not as drastic: from just under 10 years to roughly 18.

In fact, James said, even though the retirement age in the United States hasn't kept pace with life expectancy, it comes closer than many European countries.

American workers who choose to retire early can start collecting partial Social Security benefits at 62; full benefits by age 66 (a number on track to rise to 67 by 2027) and an even higher benefit if they postpone retirement until they are 70.

From an economic point of view, Turner thinks that the early retirement age should gradually increase to 63 and the full retirement age to 68. That would bring retirement ages in line with life expectancy and help keep Social Security solvent in the long run.

Those who don't want the age increased often note, rightfully, that not all workers are able to work until the official retirement ages either for health reasons or because their work is so physically demanding.

"Those issues are raised as if they're overwhelming. But they're not," Turner said, adding that fewer than 10% of workers fall into these groups and that programs could be targeted to accommodate them.

Getting beyond age

Of course, increasing the retirement age is only one piece of the pension reform puzzle that spurs controversy. Changes to the taxes that support pension benefits and adjustments to the formulas that determine them are also on the table.

Many social security systems, like the one in the United States, are largely pay-as-you-go. Workers and their employers pay into the system and that revenue is used to support present-day retirees.

Since public pushback can limit how much policymakers can do at any one time, and because unforeseen circumstances such as an economic crisis can create new concerns, pension reform is rarely a one-and-done deal.

Some countries that have embarked on reform in recent years, such as Sweden and Germany, created fail-safe mechanisms that automatically adjust benefits as needed to keep their systems solvent.

"A lot of countries have instituted some rather basic changes in the system designed to make them more fiscally responsible," James said.

Whether those kinds of changes will be accepted in the United States isn't at all clear. But what is clear is that when U.S. policymakers choose to take up Social Security reform-- which they haven't done since 1983 -- chances are good that every proposed change will make for a tough fight. To top of page

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