USA: Retirement - The Burdens of Old Age

. LONDON, England / The Economist.com / June 29, 2009 Retirement in rich countries is becoming unaffordable Click here for multimedia IN 1935, when America first introduced state pensions to relieve poverty in old age, the average life expectancy was 62. The official pension age was 65. That meant the cost of the pension system was very modest. These days people live a lot longer. America’s official pension age is now 66, but people on average retire at 64 and can then expect to draw their pension for 16 years. Over the next few decades things will get a lot worse because rich countries’ populations are ageing fast. At present, the developed countries on average have about four people of working age for every person over 65. But by 2050 this will have come down to only two workers for every pensioner. America will come off best, with a ratio of about two-and-a-half, because its population will remain relatively youthful. Britain will also do better than average, and France only slightly worse. But in Japan and Italy there will be only one-and-a-half workers for every pensioner. That will impose an unbearable burden. Pensions will have to become less generous, and most people will have to keep on working well beyond 65. [rc] Copyright © The Economist Newspaper Limited 2009.