Why the Retirement Age Is Increasing

In many places, an older retirement age is just a reversal of earlier declines.

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Pension changes ahead. When the baby boomer generation retires, it is expected to create labor shortages in many industries. "We are going to be losing a lot of workers and we don't have a lot of people to take their place because the next generation after the baby boom is smaller," says Victor Marshall, a sociology professor for the University of North Carolina at Chapel Hill's Institute on Aging. "We can reduce the future labor shortages by encouraging people to stay in the labor force longer."

[See The 10 Biggest Failed Pension Plans.]

It can be extremely difficult for lawmakers to raise the retirement age. "The political cost for increasing pension age is borne now but the benefits, in terms of lower expenditures, only appear in the future after the government's term," says Whitehouse. Nonetheless, most countries have tinkered with the retirement age at some point since their national pension programs began. Between 1949 and 2010, pension ages were constant for both men and women in only six countries: Finland, Iceland, Mexico, the Netherlands, Spain, and the United Kingdom. It appears that pension ages may be just as volatile over the next 50 years. Eleven OECD countries plan to increase pension ages between now and 2050 for both men and women: Australia, the Czech Republic, Denmark, France, Greece, Hungary, Italy, Korea, Turkey, the United Kingdom, and the United States. Austria and the Slovak Republic will increase pension ages for women to equalize them to those of men. Switzerland will increase the pension age for women, but it will still be one year below the retirement age for men.