Sobering Look at Retirement Systems in 11 Countries
- SOUTH KOREA
South Korea's retirement system is stingy and getting stingier. A government program pays benefits depending on average income and years of contributions. Full pensions are available at age 60; the age will rise to 65 by 2033. In 2008, the typical retiree could expect a government pension equal to half of average pre-tax earnings. But that figure is being gradually lowered to 40% in 2028. Employees and employers must contribute 4.5% of wages each toward retirement. The self-employed can choose to pay up to 9%. Companies also offer 401(k)-style pensions, severance packages or individual retirement accounts. Workers can receive both the government and employer plans. But many elderly South Koreans are struggling: They are living longer than they had expected and didn't save enough for old age. Many also counted on their children to care for them in retirement -- a system that's breaking down as younger workers prefer to live on their own. The country has the developed world's highest poverty rate among the aged: 45.1%, compared with an average 13.5% for 30 countries in the Organization for Economic Cooperation and Development.
Denmark offers a basic government pension and a supplementary benefit in which people receive less as their income rises. Government pensions are funded on a pay-as-you-go basis from tax revenue. There's also a government pension based on an individual's contributions at work. Additionally, 90% of full-time workers are covered by company pensions. The typical retiree receives nearly 95% of average pre-retirement, take-home pay. The poorest pensioners receive an annual payment of 7,800 kroner ($1,400). The retirement age is 65, rising to 67 starting in 2024. After 2025, the retirement age will be indexed to life expectancy to account for longer lifespans.
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