US Social Security around the world: Since it was established in 1935, Social Security has become a crucial and popular safety net for Americans nearing retirement and their families. However, despite its importance, lawmakers from both parties struggle with this key budget issue. Even though the program’s money is supposed to run out in 2037, they don’t want to make changes very often.
To give you an idea of how much money Social Security has, its running budget is $14.2 billion. In 2024, it will give $1.5 trillion in benefits to more than 67 million Americans. People often see the nearly 20,000-page Social Security Administration Program Operations Manual System as a political trap.
Some Republicans have said that raising the full retirement age from 67 to 70 could help with the money problems.
Democrats, meanwhile, favour increasing the amount of Social Security payments paid to Americans by the wealthy.
Considering the differences in opinions, it could be worthwhile to compare other retirement schemes around the world.
US Social Security around the world
The National Insurance scheme in the United Kingdom
Established in 1912, the Department for Work and Pensions in the United Kingdom is responsible for overseeing the National Insurance system, which is often known as social security. It supervised spending of 220 billion pounds, or about $280 billion, in 2021, making it the biggest government initiative in the country.
A minimum of 8% of employees’ and employers’ salaries are contributed to their salaries. That is a substantial decrease from the 12.4% contribution made in the United States. The state pension age in the UK is currently 66, but it will increase to 67 in 2026 and maybe to 68 in 2028, depending on how Parliament votes in the coming years.
The UK State Pension gives out 221.20 pounds a week, or more than $1,125 U.S. dollars monthly, to eligible recipients. In contrast, the greatest amount you could make in the United States if you were to retire in 2024 at age 70 is $4,873 USD per month—a substantial increase.
India: Employees’ Provident Fund (ND)
The Employees’ Provident Fund Organization (EPFO) receives 12% of an employee’s salary from both employers and employees. Despite the fact that the procedure appears to be confusing, considering the astonishing 427 queries on its FAQ page. It would take you more than 35 hours if you took five minutes to read each response.
Only a limited percentage of the organized labor force in India is covered by the Employees’ Provident Fund, specifically those who have a regular and direct employer-employee relationship. That means that, according to Dezan Shira and Associates, just 35 million of the 400 million labor force members have old-age income protection.
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However, if you qualify, you can begin receiving benefits at age 50, and at age 58, you can receive the full pension. According to Reuters, starting of 2023, employees will receive a pension equal to about 38% of their most recent pay.
Canada: CPP and OAS
In Canada, retirement contributions are split between the employer and the employee at 11.9% of the employee’s salary. Through two programs, Old Age Security (OAS) and the Canada Pension Plan (CPP), Canada provides financial assistance to retirees.
If you’re 65 years of age or older, you may be eligible for the Old Age Security (OAS), a monthly payment that depends on how long you’ve resided in Canada after turning 18. Your maximum monthly OAS payment if you’re 65 to 74 is 718.33 Canadian dollars, and if you’re 75 or older, it’s $790.16 (about $518 and $570 U.S. dollars).
When you retire, the CPP is a monthly, taxable benefit that continues for the remainder of your life and partially replaces your income. Pensions can be started at any age, but the average age is 65. However, you can start receiving benefits at 60 or 70. If you begin receiving your CPP pension at age 65, the highest monthly amount you can earn in 2024 is $1,364.60. Nonetheless, as of April, the average monthly payment was $816.52 ($984 and $589 in US currency, respectively). That remains below the upper limit in the US.
Which reforms are possible?
Raising the retirement age is a relatively straightforward solution that isn’t unusual compared to what other countries are doing. For example, Denmark plans to increase its retirement age from 66 to 68 by 2030 and then to 69 by 2035. Similarly, Germany intends to raise its retirement age to 67 by 2031.
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U.S. legislators are still uncertain about how to prevent the Social Security fund from running out, and any solution might not be popular. Some possible solutions are cutting back on spending and perks, which could make retirement less enjoyable, or raising taxes for some income groups, which is also not liked. One thing is certain: any plan put in place over the next ten years is likely to make people worry about the future of Social Security for people who are getting close to retirement.
