Author Topic: How retirement systems vary, country to country  (Read 172 times)

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Offline EC

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How retirement systems vary, country to country
« on: December 29, 2013, 02:18:01 AM »
Via AP:

Retirement systems vary widely from country to country. In China, policymakers are just beginning to expand retirement benefits to everyone. In Australia, people have been compelled for years to save for their own retirements. Italy and Germany are raising retirement ages and cutting benefits.

Here's a look at retirement systems in key nations:


The United States is struggling to finance its promises to future retirees. Social Security is the core of its system. Social Security payments are financed by a tax on both workers and employers. The payments average $1,269 a month. Two-thirds of retirees rely on Social Security for most of their income. Americans can collect as early as age 62 but don't receive the full benefit unless they wait later to collect — until age 66 for those born from 1943 through 1959 and age 67 for those born after. Many also rely on corporate pensions. But companies have been replacing them with 401(k)-style plans. These plans require employees to save and invest themselves. But many who are eligible for 401(k) or similar plans don't enroll in them, contribute too little or raid their accounts before retirement.


China's population is aging rapidly. That has left a shortage of working-age people to pay into the pension system. For now, the retirement system remains generous for most city dwellers. Urban workers pay 8 percent of their income toward retirement; their employers add 20 percent. The pensions equal about half of pre-retirement income. Men are eligible for pensions at 60, women at 50 to 55. Only about half of adults are covered by the urban pensions or similar pensions that are available to government workers. In 2009, China introduced a pension plan for rural areas. But it's barely begun. And it pays rural retirees an average of just $12 a month. Policymakers are considering raising the retirement age for urban workers. China tightly regulates investing, making it difficult for workers to put money in riskier investments that offer higher returns and the potential to build significant retirement savings. China is reviewing ways to ease investment restrictions.


An aging Japan is struggling to finance the retirement of its baby boom generation. It has a three-part system: Workers receive a flat-rate pension of about 66,000 yen ($657) a month from a fund partially financed by worker contributions. They also receive a second pension based on their earnings, financed entirely by their contributions. And they can contribute to additional plans that are voluntary. They can collect the flat-rate pension after contributing for 25 years; they become eligible for a full benefit after 40 years. The flat-rate and earnings-based pensions combined replace an average of only about 25 percent of pre-retirement income. Many older Japanese, who had lifetime jobs with good benefits, have accumulated hefty savings. But younger workers, who came of age amid a sluggish economy and corporate cutbacks, are struggling to save.


The other listed countries at link.
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