Lowering the retirement age won’t save US seniors

While presidential hopeful Nikki Haley proposes a rise in Americans’ retirement age, retirement differences around the world point to one thing: the age doesn't matter.

Benjamin Franklin famously wrote of the certainty of two things — death and taxes. In today’s world many workers would like to add a third guarantee: an enjoyable retirement. Approaches to retirement and the rights of senior citizens vary wildly around the globe with equally disparate results when it comes to health and the overall quality of life for people leaving behind their 9 to 5.  

With many countries seeing the average age of the population on the rise, questions about how to invest in the financial, medical, and community support that older adults will need to thrive in retirement, are a hot button issue in politics. Former South Carolina Governor Nikki Haley recently raised eyebrows on the debate stage when she promised to raise the retirement age in the United States. 

While many workers would like to retire at an earlier age, evidence suggests that age may not be the most important factor for well-being among retirees. When examining the multitude of systems and approaches to retirement, we may be able to learn a thing or two from Scandinavian countries in particular. While the actual age of retirement for, say, Finnish or Danish seniors is roughly equivalent to the US, Scandinavian countries have legal and societal provisions in place to ensure their older populations can live in dignity and comfort – and they make a huge difference in the quality of life for those who have left the working world to enjoy their senior years. 

In the United States, citizens are able to begin earning a government pension at age 62. That said, an individual who retires at 62 instead of at 67, considered the age of a full pension, will receive 30% less each month than they would have if they had continued working the extra five years. The Social Security Administration calculates one’s allotted benefits by taking a multitude of factors into account: total earnings in relation to the national average wage index, age of retirement, and total credits earned before retirement are among the criteria for designation. Citizens need to earn 40 credits (one credit is equal to one quarter-year in the workforce, so 10 years of work are required) in order to be eligible for Social Security benefits. 

According to Statista, the average full-time income for an American employee is $74,738, although that number varies significantly depending on geographic location, industry, race, gender and other factors. In 2022, for example, nearly 34% of the U.S. population earned under $50,000 a year. In many cases, people who have worked for decades and paid into the Social Security system may find that their eventual monthly benefit check is not likely to cover cost-of-living expenses, despite periodic COL adjustments made by the federal government. 

For this reason, workers in the United States often rely on privatized retirement savings vehicles in the form of accounts like 401Ks or IRAs. But being able to contribute to those accounts is easier said than done, particularly in an uncertain economic environment. A recent poll from Bankrate shows that 56% of Americans think they’re behind on their retirement savings and that only a quarter of Americans contributed to a retirement account in the last year. In fact, 45% of respondents don’t believe they will have enough savings to retire comfortably. 

It’s worth noting that a 2023 Gallup poll shows that, for six in 10 US retirees, Social Security makes up the bulk of their income, but likely due to concerns about the viability of the SSA, only 34% of non-retirees believe they will be able to be supported by a government pension. Indeed, even now a Social Security pension is hardly enough to make ends meet — over one in three adults over the age of 50 have "forgone basics such as food to pay for healthcare", according to a 2022 poll by Gallup, with women and Black adults most likely to have made sacrifices due to financial instability. 

For context, in the United Kingdom, citizens are eligible for a State Pension when they turn 66; that number will gradually rise to 67 in 2026, according to Age UK. Citizens of the UK who have contributed to National Insurance (NI) for 35 years or more will get a full State Pension, at a total of £815.4 every four weeks.

An assisted living facility in the UK can cost between an average of £600 for a residential care home) all the way to an average of £4160 for nursing care in a care home. Of the 500,000 older adults living in a care home, half of them pay their own way, and while other seniors are eligible for varying degrees of support from their local municipalities the processes for accessing this help can be difficult to navigate.

In Scandinavian countries, however, the cost of living for retirees is largely subsidized by public grants and taxes, which ensure that the elderly are able to live comfortably. These countries have long been recognized for their progressive social policies, and this holds true for their older citizens as well. Despite having similar retirement ages to the US, the pension policies and other grants allow senior citizens to access the support they need with much less logistical friction. 

Like Americans, Swedes most commonly retire at age 65, although they are eligible for a government pension at age 62. With a base pension of $1,437.5 per month (about £1,122), retiring Swedes get a significantly higher government pension than many British and American seniors. They also benefit from a strong social safety net which supports them in other non-monetary ways. The Swedish Social Services Act of 2001 enshrined into law an individual’s right to age with dignity, stating that "the social welfare committee must...take the initiative and monitor that measures are taken to create a good social environment and good conditions for…the elderly and other groups that need special support from society." 

A key initiative in this act regulates the cost of elder care with a maximum charge of $225.90 per month for services. By comparison, the average cost of assisted living in the United States is $4,500 per month, according to the National Council on Aging (NCOA). In addition, Swedish older adults with physical disabilities can access transportation in adapted vehicles at a tax-subsidized cost. Swedes also prioritize home health care, rather than a dormitory like model, where aides engage their patients in conversation and facilitate social activities. 

In Denmark, retirees are eligible for a statutory pension between the ages of 63 and 69, depending on their year of birth. They’re also eligible for supplements to cover things such as medicine, heating costs, dental care, and more. Health supplements, for example, may cover up to 85% of one’s expenses, depending on one’s assets. To receive a Danish State Pension, which is $2,166 (or about £1,651) one must have participated in the labour market for at least 27 hours a week for 20-25 years. 

The Danish government guarantees that all seniors who need housing accommodations will be accepted into a nursing home or assisted living facility within two months of being on the list. Retirees with no income pay an average of $217.5 to live in an assisted living facility, a cost that is automatically deducted from one’s government pension. 

Finnish seniors become eligible for a state pension at age 64 and three months, which is also the most common age at which people leave the workforce. They are eligible for three varieties of pensions: a national pension, a "guarantee" pension, and an earnings-based pension. The latter two are there to "ensure a minimum income for persons who have only a small or no earnings-related pension due to a short working life or low earnings", according to the Finnish Centre for Pensions.  

"It's really a balancing act when choosing when to retire," says Sarah Bonza, a board-certified family physician who specializes in menopause and women's hormonal health. While she doesn’t advocate for an endless career, she is mindful that retiring too early can lead to a decline in one's physical and mental health: "During my years practicing as a family physician and providing hospice care in the United States," she says, "I’ve observed that once you retire early, you lose your daily routine. Structure is lost, including one's sense of purpose, which can lead to symptoms of anxiety or depression." 

But will the younger generation of Americans even get to make that choice? According to a recent study put forth by the TIAA Institute, “Fewer than half (47%) of those not yet retired are “very” or “somewhat” confident they will reach this milestone when intended; 15% don’t plan to retire at all. Confidence is lowest among Americans ages 22-34 and Hispanics (each 37%).” With a hard to access and limited social safety net, many Americans choose to retire later (when able to retire at all) in order to maintain access to healthcare and critical income. 

A July 2023 poll by Axios and Ipsos shows that one in five Americans believe they will never be able to retire. "When it comes to how Americans finance retirement, few feel Social Security will cover most of their expenses," according to the report. They’re probably correct, as the survey also shows that "nearly one in five retirees (19%) say that Social Security covers a quarter or less of their expenses."

This observation is borne out by the research. A 2020 study by Dr. Markus J Haapanen of the Folkhälsan Research Center et al examined the relationship between "frailty" and early or late retirement age among male executives. The study found that both extremes were predictive of increased frailty. Dr. Jaapanen writes that "the lowest prevalence of frailty was observed in former business executives who retired at ages 66-67 years." 

Psychiatrist Gary Small says that, overall, people are able to enjoy the benefits of retirement when they "have adequate financial resources and good health," adding that "retirement also increases the risk for developing cognitive decline in older adults, so premature retirement could further burden society with the costs of care of a larger pool of patients with dementia." In other words, when the social safety net is in place to provide healthcare, adequate housing, and community for our elders – not just a private savings vehicle like the US 401K – they can stay sharp and thrive in their later years.

This, too, can be tracked in research. A September study from TIAA Institute explores the connection between wealth and longevity and finds those with more finances literally live longer. “Between two cohorts turning age 65 a decade apart, disability-free life expectancy gains accrued only to the wealthy,” write the authors, adding that the bottom wealth quartile of the cohort actually experienced  disability-free life expectancy losses of 0.04-0.24 years, depending on gender. 

When considering the problem of retirement, the questions are often of timing. When is the right age to retire? When should one begin saving for retirement? Looking at the Scandinavian models, perhaps the question should be one of method. Not when, but whether the systems in place reflect the physical and emotional needs of older citizens.