US - Rising ageing-related entitlement spending will cause unsustainable future deficits unless public pensions are reformed, the Organisation for Economic Cooperation and Development (OECD) has warned.
Reform is necessary to speed up the transition from 65 to 67 for the age at which full benefits are paid said the OECD in its economic survey of the US.
It also said the federal government could stimulate labour market participation by increasing the early retirement age from 62 to 64, raising the financial penalty for taking early retirement, and introducing further incentives aimed at delaying exit.
This would expand the tax base and improve retirement incomes, it argued. The OECD added such adjustments would also help to eliminate the Social Security system’s current actuarial imbalance to the extent that it would not re-surface over time.
Retirement savings among lower income groups that currently provide insufficiently for their retirement could be boosted by increasing participation in existing DC plans outside of Social Security, the OECD claimed.
It cited automatic enrolment in employer-sponsored plans or a refundable saver’s credit for low income households as examples, and warned that budgetary discipline needs to be reinforced in the face of “looming spending pressures from the retirement of the baby boom generation”.
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