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Monday, August 13, 2012 - Page updated at 09:00 p.m.
Social Security cheap compared with Europe's
By STEPHEN OHLEMACHER
The Associated Press
WASHINGTON — Compared with most public pension systems in Europe, Social Security is downright frugal.
On average, European pensions are more much generous than Social Security, providing retirees with benefits that come closer to matching the wages they earned when they were working. Americans are expected to rely more heavily on private pensions and savings when they retire.
European workers also have been able to retire earlier than U.S. workers, though many European nations are retreating from those policies, causing more than a little unrest. Taxes also are higher in most European nations, and some of their retirement systems face worse financial problems than Social Security.
That's why "austerity" has become the buzzword across Europe. Among developed nations, the United States is one of only a few that haven't made changes to their public retirement systems the past few years, said Edward Whitehouse, who studies the systems for the Paris-based Organisation for Economic Co-operation and Development.
"Countries which had been reluctant reformers, France and Italy and Greece and so on, have been reforming like mad," Whitehouse said.
Greek lawmakers, for example, voted in 2010 to raise the retirement age to 65. Previously, some Greek workers could retire in their 50s and get full benefits. The United States has been gradually increasing the full retirement age for Social Security from 65 to 67. It is now at 66.
How Social Security stacks up against public retirement systems in Europe and the United Kingdom
Retirement age when workers can get full benefits:
United States: 66
Italy: 66 for men; 62 for women.
United Kingdom: 68
Note: Some countries offer early reduced benefits; others offer full benefits at any age after working a certain number of years.
Share of wages replaced by retirement benefits for average worker:
United States: 39 percent
France: 49 percent
Germany: 42 percent
Greece: 96 percent
Italy: 65 percent for men; 51 percent for women
United Kingdom: 32 percent
Tax rates dedicated to public pensions in 2009:
United States: 12.4 percent
France: 16.7 percent
Germany: 19.9 percent
Greece: 20 percent
Italy: 32.7 percent
United Kingdom: No separate pension tax
Note: Tax rates reflect combined rates paid by workers and employers. The Social Security tax rate for the United States was reduced to 10.4 percent in 2011 and 2012 but is scheduled to return to 12.4 percent in January.
Share of gross domestic product spent on cash benefits in 2007:
United States: 4.2 percent
France: 12.5 percent
Germany: 10.7 percent
Greece: 11.9 percent
Italy: 14.1 percent
United Kingdom: 5.4 percent
Sources: Organisation for Economic Co-operation and Development; Social Security Administration; reporting by The Associated Press
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