France lifts retirement age to balance pension books- when in US ?

[nphx]

How do you ER hopefulls deal with the irresponsible elected officials?

 

[F4mandolin]

I hope to go in one year at 54....almost exactly. Just hope they raise taxes or something....that I can kind of deal with...we will likely be in the lower 15% range after I quit. If they raise SS age/pension age/ etc etc..... I will need a lot more beer....... but I can't see them raising the ages of people nearing retirement.

 

[BigNick]

Since most of us here are not planning to live just on an SS-type income, any increase in the age at which you get your SS payout is just another factor in how big the portfolio has to be. So someone in France who was planning to stop working at 55 and get the SS money at 60, thus having to budget for 5 years of heavier drawdown from the (hopefully) big pile, will now have to budget for that heavier drawdown for 7 years. A typical pension is about 16K/year, so that can probably be best achieved by simply burning 30K more of the principal amount plus the approx 2K of associated return. (Or having 400K more in the pot at 4%, but then you've got "too much" because you have that 16K/year extra for ever.)

 

[ziggy29]

For one thing, if the elected officials are irresponsible, we have to look at who elected them.

Second of all, yes -- current retirement systems (SS, public pensions, et cetera) are largely unsustainable at their current benefit levels and eligibility ages. Clearly, a combination of one or more of four things have to happen:

* Increased contributions/taxes for people currently contributing to the plans
* Increased means-testing of benefits
* Increased eligibility age (and increased reductions in benefits for early retirement)
* Reduced benefit levels

Each has its own pros and cons in dealing with the problems. The main problem here is that everyone seems to expect *other people* to bear the pain while they get what was always promised to them. Unfortunately it's our political nature to not be willing to look for common ground or a way to agree to "shared sacrifices" until the crisis is imminent.

And as for lifting the retirement age, it sounds like it makes actuarial sense (and it does) -- but what of the already high unemployment rate? All this would do is throw more folks into the workforce when unemployment is already very high. The jobs wouldn't magically appear. So instead of paying out their pensions or SS, we're paying out unemployment checks. In that sense it's just a shell game. (And this says nothing of the rampant age discrimination those older workers would face if their retirement eligibility were delayed.) I'm not saying that isn't a *part* of the solution, but it's not a cure-all, especially when unemployment is already high. It only works if there are jobs available and employers are willing to hire those in their 60s, for example.

 

[Gone4Good]

As to when we start dealing with these things, sometime next year. Dealing with the long-term fisc is becoming the number one political issue. I think we'll see substantive action in the coming years, without question.

As an ancillary note, for everyone expecting higher interest rates . . . don't hold your breath. With the world now turning to removing economic support long before sustainable recovery is entrenched, we're likely to see years of low inflation, or perhaps even deflation. I wouldn't sit at the short-end of the curve hoping to take advantage of the coming spike . . . you'll probably be waiting a long time. Rates aren't going anywhere.

 

[FUEGO]

For young dreamers in their 20s and 30s I would say there is a very good chance that today's SS benefits will be greater than what you will actually receive at age 67. That's my assumption at least. Maybe add those in their 40's and early 50's into the "expect change" category. I imagine those within a decade or so of SS retirement won't have their benefits substantially modified. Maybe watered down some or taxed more.

I don't really factor SS into my retirement plans since I plan to ER in my 30's and SS won't start for another 3 decades or so. I imagine I'll get at least 1/4 to 1/2 of what I am promised today. It will be icing on the cake (very sweet icing).

As for government employee pensions, some may modify their retirement ages to balance their pension books without increasing the employer contributions to the retirement plans. In my state, once you hit ~28 years of service you can retire and draw your full pension. This means some folks who started working for the state at age 17-18 are retiring in their mid to late 40's and drawing on the pension for up to 20 years before the "traditional" retirement age of 65. Yet the same employee, where they to start working for the state at age 37, would still receive the same pension benefit at age 65, even though the state was paying in to the system the same amount as for the 17 year old. Similarly, someone working in a low skilled position for 25 years, then getting promoted to a much higher paying job the last 3 years would get their pension based on the "high 3" salary. Pension benefits aren't tied to many real life factors that affect what the benefit should be worth.

 

[CuppaJoe]

How do you ER hopefulls deal with the irresponsible elected officials?

Way back when I was a young ER hopeful full U.S. Social Security retirement age was 65. The word "irresponsible" never crossed my mind when the age was raised.

 

[ziggy29]

Way back when I was a young ER hopeful full U.S. Social Security retirement age was 65. The word "irresponsible" never crossed my mind when the age was raised.

I could be wrong, but I think the OP's point is that elected officials are being irresponsible by *not* raising the retirement age. Actually, in terms of economic impact, that would be more important to tackle on some of the "3% at 50" type state and local pension plans than in SS or FERS. Federal retirement plans (now that CSRS has been sunsetted) are *far* more sane and sustainable than many state and local public retirement plans.

 

[CuppaJoe]

I could be wrong, but I think the OP's point is that elected officials are being irresponsible by *not* raising the retirement age. Actually, in terms of economic impact, that would be more important to tackle on some of the "3% at 50" type state and local pension plans than in SS or FERS. Federal retirement plans (now that CSRS has been sunsetted) are *far* more sane and sustainable than many state and local public retirement plans.

Thanks, Ziggy, I knew I didn't understand where OP is coming from. We might also point out that France raised the age from 60 to 62. I do not know if their plan is similar to U.S. Social Security.

 

[Independent]

Raising the normal retirement age to reflect greater longevity makes all sorts of sense, but let's remember that it is not enough to balance SS. Part of the problem is that the WWII generation had 3 children per couple, the Boomers had 2. Even if mortality rates hadn't changed, Boomers would have to get lower benefits, or their children would have to pay more taxes.

Note that since the Boomers kids are having only 2 children per couple, this issue won't go away.

 

[ESRwannabe]

I'm not worried about it. I will have a pension one day, but I won't be reliant on it. I feel pretty confident that I'll be financially independent by 50, just off of my brokerage account investments.

 

[Westernskies]

How do you ER hopefulls deal with the irresponsible elected officials?

Vote the bums out!

 

[Bikerdude]

I don't really see a problem with raising the SS retirement age as long as sufficient notice is given to those affected. In addition, I would hope the age 62 option is retained even if at a lower rate of current law.

 

[LARS]

My best guess is that age eligibility will continue to increase over time and FICA caps on employees will be raised (or eliminated). I think it is highly unlikely that means testing occurs. The costs/problems of policing, qualifying one year to the next (if means test income goes down), abhorrent behavior to savings ethics, politics of changing SS from insurance to welfare all say to me means testing won’t happen. Instead, tax rates on ordinary income will rise and that will capture more of SS income: which is the same as means testing.

 

[friar1610]

SS aside, I think it's only a matter of time before the majority of people rise up against government pensions (which, by and large, are pretty good.) Their argument, which it's hard to refute, will be, "why should I, who had a pension taken away from me and now must plan for my own retirement, pay taxes to sustain pensions for people who work for me and will retire with a much better deal?"

I understand that long ago, pensions were the payback for lower salaries for civil servants, whether federal, state or local. But much of the push in recent years has been to get "equity" between government salaries and those of the private sector. So the concept of the low-paid civil servant squeaking by for a career to be rewarded at the end with a nice, secure, inflation-adjusted pension may not hold water any more.

I receive a fairly generous federal pension although it is based on military service, not on civil service. If the reaction I mentioned above comes to pass, I'm not sure how the general populace will react to the continuation of military pensions, given the unique circumstances inherent in military service.

 

[ziggy29]

In addition, I would hope the age 62 option is retained even if at a lower rate of current law.

IMO, it should be. If people can get by with a lower SS check at an earlier age (provided the actuarial reduction is sound and revenue-neutral), it actually makes sense to keep that option because that's one less person who needs to compete for a j*b in a lousy j*b market.

 

[ziggy29]

I receive a fairly generous federal pension although it is based on military service, not on civil service. If the reaction I mentioned above comes to pass, I'm not sure how the general populace will react to the continuation of military pensions, given the unique circumstances inherent in military service.

I don't think there's as much backlash on military pensions (or on cops and firefighters) as on other public paper-pushers which have private sector equivalents who don't get that deal. I don't see any real push to take away the pension eligibility for someone who put in their 20 in the military. Having said that, it seems rather odd to be eligible for a lifetime pension at age 38 (assuming no disability). I suppose as long as it's low enough that it is actuarially equivalent to a higher benefit at (say) 55-60 it isn't a big deal. It just seems odd that someone can "hire in" at 18, leave at 38, and most likely collect a pension for twice as long as they worked (assuming they live to age 78).

But part of the problem is the combination of longer life expectancies and early eligibility age is killer in some plans -- especially the "3% at 50" plans in many state and local governments. Since the sunsetting of CSRS, pension costs haven't been a big problem at the federal level; that's one thing the feds did right over 25 years ago. As I've often said here, I think FERS is a good "model" for what an employer-sponsored retirement plan should be.

 

[haha]

My former FIL has been collecting an O-6 pension for 40 years and counting. He has also been collecting other federal and state pensions in his spare time.

No flies growing on that boy.

Ha

 

[HFWR]

Vote the bums out!

And probably get a whole new set of bums...

 

[nphx]

Thanks all for weighing in. I’m mid 40’s small business owner with my head down running the operation and accumulating the er bucket. Writing the quarterly tax bill (note to self… don’t post after adult beverages and within 48 hours of paying taxes) has me wondering if I should keep up the efforts. I’m not happy with money grabs or bailouts – anyone with common sense was standing on the side lines expecting the fraud peddlers to go to jail and the scheme settle out – instead the taxpayers got stiffed. So paying the tax bill comes with bitterness. Maybe my mind is too simple – in the cloud of the national debt and its impact I can zero in on a direct thread of the fallout hitting me in 20 years.

 

[friar1610]

I don't think there's as much backlash on military pensions (or on cops and firefighters) as on other public paper-pushers which have private sector equivalents who don't get that deal. I don't see any real push to take away the pension eligibility for someone who put in their 20 in the military. Having said that, it seems rather odd to be eligible for a lifetime pension at age 38 (assuming no disability). I suppose as long as it's low enough that it is actuarially equivalent to a higher benefit at (say) 55-60 it isn't a big deal. It just seems odd that someone can "hire in" at 18, leave at 38, and most likely collect a pension for twice as long as they worked (assuming they live to age 78).

Two points:
- One of the arguments for 20-year pensions for military, police, firefighters is that those jobs require more physical stamina than man other jobs and they don't really want people to stay around too long.
- In the Navy (and probably with the other services but I'm not sure) there is a thing called High Year Tenure (HYT). That sets certain mandatory retirement points depending on the rank you have attained. For example, if I recall correctly from 14 years ago, a Navy Chief Petty Officer (E-7) had to retire at 22 (or maybe it was 24) years if s/he hadn't been selected for Senior Chief (E-8). A Senior Chief had to retire at 26; a Master Chief (E-9) could stay for 30. There were similar gates on the officer side.

I was at a Navy event recently and met a retired Master Chief who had retired at 20 years. That he had made Master Chief early enough to serve the required 3 years in that grade and still be able to retire at 20 was remarkable! But I don't think "the system" really wants folks like him to bail as soon as they can.