How is retirement in your country?

[Sagant]

Hi, this thread is not exactly a "Career Guidance", but it is rather about how it will end. If it does not belong here, I apologize.

[Note from mentor: I've moved this from Career Guidance to General Discussion. Please keep this as factual as possible, and avoid contentious political arguments. In the US at least, this topic tends to stir political passions...]

So, I'm from Brazil, but I have plans on moving out of here to some better country. My options so far are: US, Canada, UK and France. I want to know what to expect about my life when I retire in a foreign country - given that I'll be able to do that, of course. Even though I know retirement laws are different from country to country, I wanted to ask you for help on how does it work on your country, or if you know the rules for those listed.

For example, here in Brazil we have a system where you give an amount of your salary to a federal organization each month, who, when you retire, will give you a "retirement salary" as long as you live. The amount you'll receive depends on how much you contributed during your working life, however there is a "ceiling" of at most R$ 4000,00 (about US $1300,00) to receive a month. This can be not enough for those who received more than that, so you can also contribute to private companies that will also pay you once you retire, and you can actually retire receiving basically the same thing you received when working.

Is there anything similar out there? What about ages? When can you retire, and when are you obligated to retire (here we are at a certain age)?

PS: Of course there are certain careers that have it differently, but consider a regular employee in the tech/research sector, or an university professor. Nothing dangerous or life risking.

 

[Dr. Courtney]

The government funded retirement system in the US is called social security and likely should not be depended on.

Most folks who live well in retirement do so on their own savings and investments. Most who only rely on the government programs are regarded as poor.

 

[jtbell]

In the US:

1. The national government pension scheme is Social Security, as already noted. It's funded by a special income tax ("payroll tax"), in addition to the normal income tax. The amount that you receive depends in a complicated way on how much income you've paid tax on during your career, and on when you start to receive it. The calculations are based on a "normal retirement age" of 65 through 67 (depending on when you were born), but you can actually choose to receive a lesser amount starting as early as age 62, or a larger amount starting as late as age 70.

There are well-known long-term funding problems with Social Security. There will certainly be changes during the next 20 years, perhaps even during the next few years, and they will certainly be accompanied by great political controversy.

2. Some companies provide their employees with pensions. However, during the past few decades, many companies have replaced them with 401(k) plans, as below, for new employees. I think most people who now are eligible for pensions work for old, large companies or for the government (federal, state, or local), including professors at many state universities. Sometimes these pensions are in addition to Social Security, sometimes they substitute for Social Security. Government-employee pensions in some states and cities are underfunded and subject to controversy and potential cuts. For example, the city of Detroit went bankrupt recently; I think it had to reduce pensions for people who were already receiving them.

3. There are various schemes by which people can save part of their wages in a tax-advantaged way. Basically, the amount saved is excluded from current income taxes, but when you withdraw the money in retirement, you have to pay income tax on the entire amount. If you set up one yourself, it's called an IRA. If you enroll in one through a for-profit employer (company), it's called a "401(k) plan." If you enroll in one through a non-profit employer (university, school, church, etc.), it's called a "403(b) plan." There are some other variations. The money can be invested in various ways, depending on the individual plan. In an employer-sponsored plan, the employer often contributes some money in addition to your contributions. They all have somewhat different rules, but generally you must wait until about age 60 to start withdrawing money, and at age 70 you must start to withdraw a certain percentage annually (and pay taxes on it!).

4. You can also of course save money (after paying income tax on it) in the usual variety of ways: savings accounts, the stock and bond markets, real estate, etc.

Different people use different combinations (and amounts) of the above. I've just retired, and will be using #1 (delaying until age 70), #3 and #4.

A common rule of thumb for people who are currently working, and who do not have a pension as in #2 above, is to aim to save at least 15-20% of their salary under #3 and #4.

 

[MsDeckard]

I believe the UK is pretty similar to the US. Here you pay national insurance from your wages and I think you need to pay in for 10 years to qualify for a state pension. The age limits are changing, I think now you have to work until you are 65 or 66 to be able to claim. As with the US the sum you receive weekly isn't enough to live on comfortably. At the moment the most you could receive is £119 a week. Employers are now required to contribute towards a private pension and you are encouraged to match the contribution. Pensions are a massive issue here as most people have not saved enough and that combined with rapidly increasing energy and property prices has meant some older people have been unable to eat properly and heat their homes. Theres loads of info on the uk gov website.

 

[Sagant]

Interesting systems. Well, of course they may change, especially because of population agening, but it is still good to have an idea how these things are done.

It doesn't, however, sound so secure this way, but perhaps is just because I'm used to the scheme in my own country (which will probably come to modifications somewhere in the next years).

One more question: Is it relatevely easy to make an investment? Here we can make investments through the bank. Your account manager helps you by investing your money in some sort of "fund", of course the more you have, the best the investment and therefore the more money you make, though one does not have to worry about basically anything, since the bank does pretty much everything for you in a relatevely secure way - it is very hard to actually lose money. On the other hand, if one wants to make even more money, than he/she should invest on its own and suffer all the risks this can take.