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How retirement is being reinvented worldwide

People are working longer – out of necessity and choice – as the world undergoes one of the biggest demographic shifts in history.

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PENSION PAINS

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Alabama truck driver J.B. Wiley has plied the highways for the same company for 29 years. He says the talk in the US of raising the Social Security age simply makes him angry. He's worked his whole life with his eyes fixed on a magical number: 62, the current minimum age to receive benefits. And now some people in Washington want to push eligibility requirements out further?

The new retirement does mean some tough choices lie ahead both for individuals like Mr. Wiley and governments around the world. The aging workforce will call on individuals to forge new career paths later in life and for employers to help them. It will call on parliaments to repair endangered public-pension systems. And it will call on policymakers to hone new strategies to make workers of all ages more skilled and productive.

What's clear, fiscal forecasters say, is that many nations have a relatively short window of opportunity to adjust before the demographic transformation hits with full force. "Living standards in many countries are likely to decline unless the labour force can be made more productive or expanded," researchers at the World Economic Forum and Mercer, the benefits firm, warned in a 2009 report.

The report called for a mind-set shift from "challenge" to "opportunity," arguing that action is urgent but that creative thinking about pension, health care, and workplace policies can make a difference.

Pension expert Ms. Rappaport agrees. "I think it's solvable," she says. "We can make prudent decisions, [although] the decisions may not mean that we can have every single thing we want."

By some indicators, the squeeze is already arriving. Consider the financial storm in Europe over whether governments will be able to pay their debts. Although the financial crisis has been a catalyst, the underlying debt problems are tied closely to the demographics of aging and pension programs designed for an earlier era. France and Britain are just the latest to raise their retirement age.

Other countries, including Hungary and Bulgaria, have recently forced the transfer of citizens' private pension money to the state to make up for government shortfalls. Even Germany, viewed as Europe's bastion of financial stability, isn't immune from the looming fiscal pressures.

In the US, it's not clear if or when the eligibility age for Social Security will rise. When Congress does act, its approach may involve blending several steps to make the program solvent for the long term. But an age boost was one of the leading ideas debated, and mildly embraced, in the recent report of President Obama's bipartisan fiscal commission.

Separate from official retirement ages, governments can also try "softer" ways of getting people to work extra years. Some examples:

•Programs to help older workers find and prepare for new jobs. In fast-aging Japan, an agency called the Silver Human Resource Center is viewed by some economists as a model.

•Tax rates that are lower for older workers (an idea backed by economists at the Federal Reserve Bank of Chicago).

•Policies to make commuting or telecommuting easier for elderly workers.

Individuals, of course, have motivations for working that go beyond government incentives and penalties. In China, accountant Yang says she's staying employed partly to help her son buy an apartment. That's a big deal for him – enhancing his desirability as a marriage partner – but Yang's goal is also to give herself a place to live in later years.

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