Every country has retirees, but not every country goes about planning retirement in the same way. That being said, there are some similarities. For example, most countries fund retirement through a mix of state pensions, occupational pensions, and private savings.
Ideally, you’ll have all three, which is why Americans often set up their own retirement funds, and Australians find an SMSF accountant to help them do the same. To gain a better understanding of these choices, let’s take a look at five country-specific ways of planning for retirement.
1. The United Kingdom
In the UK, most people retire at 66 (although that will rise to 67 over the next few years). Upon reaching that age, you can either retire and receive a pension or put off the state pension and continue working. If you choose the latter, you might receive extra funds or a lump-sum payment when you do choose to retire.
UK retirement is funded by both a state-run pension and an occupational pension. The amount you receive from the first one depends on your age and individual contributions. Employees are automatically enrolled in the second one. On top of those are individual private savings (which tend to be low for most households).
2. The United States
Full retirement age begins at 66 or 67 years old, and early retirement begins at 62. If you choose early retirement, you get a smaller amount of benefits. If you wait until 67, then you receive the full payment.
The state-pension system is funded in large part by social security taxes paid by employers and employees. Alongside this, a little over half of America’s workforce has a pension plan from their employer – most often a 401(k). Private savings make up the rest.
Australian retirement begins at age 66. If you’ve been a resident for at least ten years, then you’re able to receive benefits from the Age Pension system. The exact amount of money you receive depends on your income, assets, and other factors.
The Age Pension is a state-run program that’s mostly funded through tax revenue. It provides basic income during retirement. The occupational pension is funded by workers between 17 and 70 making over $450 a month. The third form of retirement funding comes from personal savings that are often subject to beneficial tax laws.
The retirement age in Singapore is 62. However, if you’d like to defer benefits and continue working, you can take part in a “re-employment” program that lasts until age 67.
To fund retirement, the Singaporean government manages the Central Provident Fund with monthly contributions from employers and employees. It’s broken into the following accounts:
- Ordinary Account for investment, education, home purchasing, and insurance;
- Special Account for retirement-related expenses;
- MediSave Account for medical expenses and insurance;
- Retirement Account for those over 55.
The country also encourages personal savings.
5. The Netherlands
The retirement age in the Netherlands is 66 but will rise to 67 by 2024. If you choose to work past retirement age, then it’s possible to build up a bigger pension. Either way, the Dutch pension system is considered one of the best in the world.
It’s funded in three ways: a state pension contributed to by all taxpayers, occupational pensions contributed to by employers and employees, and private pensions contributed to voluntarily by individuals. The amount you receive upon retirement depends on how much you and your employer contribute to each account.
Although these strategies differ, the end goal is the same: funding retirement. To do so requires collaboration from states, employers, and individuals, as well as a fair bit of planning.