Approaches to Retirement Ages Across Countries: Comparing the U.S. and Seven Asian Nations
Retirement policies vary widely around the globe, with each country implementing unique systems to provide for their aging populations. Differences in retirement age, pension calculation methods, and the structure of benefits highlight the diverse approaches to retirement. Here, we examine the retirement frameworks of the United States and seven Asian countries: China, Malaysia, Japan, Indonesia, South Korea, Thailand, and the Philippines. Additionally, the Mercer pension rating provides insight into the adequacy, sustainability, and integrity of each system.
United States
- Standard Retirement Age: 66-67 (depending on birth year)
- Earliest Retirement Age: 62 (with reduced benefits)
- Average Life Expectancy: 79.74 years
- Mercer Pension Ranking: 22
In the U.S., retirement benefits are based on contributions to the Social Security system. To qualify, individuals must contribute for at least 10 years. The monthly benefit amount is calculated based on the top 35 highest earning years, adjusted for current dollars. While early retirement is possible at 62, benefits are reduced for those who choose this option.
China
- Standard Retirement Age: 60 for men, 50 for blue-collar women, 55 for white-collar women
- Earliest Retirement Age: 55 for men, 45 for women in certain industries
- Average Life Expectancy: 78.79 years
- Mercer Pension Ranking: 35
China’s pension system mandates 15 years of contributions before residents can receive benefits. Contributions are 8% of wages, with the pension amount calculated as 1% of the pensioner’s average indexed wages and province-wide average earnings for each year worked.
Malaysia
- Standard Retirement Age: 55 (retirement is not mandatory)
- Earliest Retirement Age: One-time withdrawal at 50
- Average Life Expectancy: 76.42 years
- Mercer Pension Ranking: 32
Malaysia’s system is divided into two tiers: the first tier for retirement purposes and the second for specific expenses like housing or education. Workers contribute 11% of their earnings, split into 70% for the first tier and 30% for the second. At 55, both tiers merge, allowing access to the funds either as a lump sum or monthly payments. Funds earn a minimum interest rate of 2.5%.
Japan
- Standard Retirement Age: 65
- Earliest Retirement Age: 60 (with reduced benefits)
- Average Life Expectancy: 84.95 years
- Mercer Pension Ranking: 30
Japan features a two-tier system with a basic flat-rate pension and an earnings-related plan. Residents must contribute for at least 10 years to receive basic benefits, with full benefits available after 40 years of contributions. Pensions are indexed to net wages until the pensioner reaches 67.
Indonesia
- Standard Retirement Age: 58, increasing incrementally to 65 by 2043
- Earliest Retirement Age: Any age with at least five years of contributions and six months of unemployment
- Average Life Expectancy: 71.10 years
- Mercer Pension Ranking: 41
Indonesia offers both an earnings-related scheme and a phased-out defined contribution plan. Workers contributed 2% of their earnings to the latter, which allowed lump-sum or periodic payments upon retirement. The earnings-related plan, established in 2015, is based on earnings and contributions and is indexed to prices.
South Korea
- Standard Retirement Age: 62, increasing to 65 by 2033
- Earliest Retirement Age: 57 (with reduced benefits), increasing to 60 by 2033
- Average Life Expectancy: 84.14 years
- Mercer Pension Ranking: 42
South Korea’s pension is earnings-related, calculated from individual and population-wide average earnings. Residents qualify after 10 years of contributions. Delaying retirement can increase benefits by 7.2% annually up to five years beyond the standard retirement age.
Thailand
- Standard Retirement Age: 55
- Earliest Retirement Age: No early retirement option
- Average Life Expectancy: 79.91 years
- Mercer Pension Ranking: 43
Thailand combines basic and earnings-related benefits. Eligibility requires at least 15 years of contributions. The system allows workers to accrue 20% of earnings for the first 15 years and 1.5% thereafter. There is no provision for early retirement, but extended work results in increased benefits.
Philippines
- Standard Retirement Age: 65
- Earliest Retirement Age: 60, but benefits are suspended if the retiree returns to work before 65
- Average Life Expectancy: 72.30 years
- Mercer Pension Ranking: 46
The Philippine retirement system includes basic, earnings-related, and minimum pension components. The basic pension is adjusted for inflation and wage growth, while the earnings-related pension is based on average earnings. Workers with at least 10 years of contributions can receive a minimum pension. Early retirement is possible at 60, but returning to work before 65 suspends benefits.
Conclusion
While the retirement systems in these countries vary significantly, they all aim to provide financial security for their elderly populations. The Mercer pension rating highlights the strengths and weaknesses of each system, offering insight into how well these countries support their retirees. Understanding these differences can help inform policy decisions and personal retirement planning across diverse economic landscapes.
