The New Retirement Age in Denmark Is 70
The Danes set an example for timorous American politicians who refuse to reform unaffordable entitlements.
Liberals have long argued the U.S. should be more like Europe. If they mean Denmark, then yes, Washington can learn a thing or two about Social Security reform, given that neither political party in the U.S. has a serious plan to avoid a 21% cut to retiree benefits in less than a decade.
Copenhagen raised its retirement age last week to 70 for Danes born in 1971 or later. Workers currently become eligible for the Danish equivalent of Social Security at age 67, which will go up steadily in coming years.
This is the result of a reform passed in 2006 that ties the retirement age to average life expectancy at age 60. The typical longevity of retirees in developed economies long ago surpassed the estimates that were baked into government retirement programs when those entitlements were created. That’s a blessing for individuals and families but a curse for government finances. Denmark is trying to ensure it can fund its program and keep the system solvent without imposing an ever-increasing fiscal burden on younger workers.
Note that the latest bump in the retirement age was pushed through parliament by a center-left government, under Prime Minister Mette Frederiksen of the Social Democratic party. These changes always are controversial, and Ms. Frederiksen has suggested Denmark may eventually need to slow the pace of increases.
There aren’t politically easy answers, and people in physically demanding professions might struggle to work additional years in those same jobs. Yet there appears to be a cross-party agreement in Copenhagen that leaving the retirement age unchanged is reckless.
Similar debates have become the norm in Europe in recent years. Sometimes governments move in reverse, as when Germany under Angela Merkel lowered the retirement age to 63 from 67 for some workers. But the general trend is that the age of eligibility rises alongside life expectancy. Even France raised its retirement to 64 from 62 under a reform pushed through by President Emmanuel Macron.
As a reminder, the U.S. system of Social Security is projected to be insolvent in 2033, at which point the checks to retirees will suddenly be 21% smaller. Nobody wants this to happen, but nobody wants to take the heat for proposing real reform, so the U.S. keeps barreling toward a cliff while pretending not to notice.
Denmark is a model by comparison. This is what it looks like when politicians are honest about a fiscally responsible retirement age in an era of modern medicine—and then have the courage to do something about it.