Pension Reform Showdown: Will The U.S. Follow France’s Bold Retirement Age Changes?

Today, French President Emmanuel Macron took a bold step by raising the legal retirement age in his country from 62 to 64, bypassing parliament and potentially setting his government up for a vote of no confidence. The unpopular pension reform, Macron says, is necessary to address the financial deficits caused by pandemic spending and the European energy crisis.

With the U.S. watching closely, could France’s pension reform serve as a blueprint for future changes to Social Security?

I don’t envy Macron for making this tough call. The people of France enjoy one of the most generous pension systems in the European Union (EU). According to 2020 data, France spent a jaw-dropping 14.7% of its GDP on pensions alone.

However, the sustainability of this pension system is being threatened by demographic changes. The Western European country also has one of the highest life expectancies in the world, and the expected years in retirement have increased considerably. French men were expected to spend 23.5 years in retirement on average, second only to men in Luxembourg, according to the Organization for Economic Cooperation and Development (OECD). For women, that number rose to 27.1 years.

Like other high-income countries, particularly those in Europe, France’s birth rate has steadily dropped over the years, guaranteeing there will be fewer workers to support a rapidly aging population. In 2021, there were 10.5 births in France per 1,000 people, down from 13.2 births 30 years earlier.

Social Security In The Crosshairs?

No doubt U.S. lawmakers are keeping a close eye on the political fallout from France’s retirement reform. If the widespread strikes and marches are any indication, the future of Macron’s government appears to be in jeopardy.

The truth is that the U.S. may be facing a similar reckoning, and investors and savers need to be prepared. Sixty-six million Americans currently receive monthly benefits from Social Security, which, if nothing changes, is expected to be insolvent by 2035 at the latest.