Social Security cheap compared with Europe's
WASHINGTON (AP) — Compared with most public pension systems in Europe, Social Security is downright frugal.
On average, European pensions are much more 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 American workers, though many European countries are retreating from those policies, a subject that has caused more than a little unrest.
Taxes also are higher in most European countries and some of their retirement systems are facing worse financial problems than Social Security.
That's why "austerity" has become the buzzword across Europe. Among developed nations, the U.S. 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 in an interview.
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 U.S. 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 U.S. 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: OECD; Social Security Administration; reporting by The Associated Press.