Denmark Raised the Social Security Age to 70. Should the US Do the Same?
Social Security is facing a shortfall. One idea is to raise the retirement age, as Denmark did recently, but would it work in America?


How to fix Social Security is an ongoing question, with numerous proposed solutions. After all, it’s projected to run out of money in 2033.
If no action is taken at that point, the fund will only cover 77% of the scheduled benefits. The deficit could end up even higher if fertility rates in the U.S. remain low, millions of immigrants who pay into the system are deported and life expectancy continues to increase.
As a result, think tanks, non-profit organizations and lawmakers have been offering up a range of solutions to address the problem. While everyone has different ideas on how to address the shortfall, they agree that it needs to be fixed sooner rather than later.
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“We should do something because of the size of the deficit we are facing,” says Alicia Munnell, a senior advisor at the Center for Retirement Research at Boston College. “The prospect of a 23% benefit cut only eight years away should focus our attention on restoring balance to the program.”
Recently, Denmark, which is also facing a shortfall, opted to raise its retirement age to 70, the highest in Europe. Denmark's current retirement age is 67; it is raising it a year at a time, every five years, until it hits 70 in 2040. But what works for Denmark may not work for the U.S.
What went wrong with the Social Security trust fund?
Social Security gets most of its funding from payroll taxes paid by both workers and their employers. A smaller portion comes from interest earned on the trust funds where these taxes are held. This system worked well until the 1970s and early 1980s, when it began running deficits.
In 1983, Congress reformed the system by increasing payroll taxes and gradually raising the full retirement age (FRA). This effort was successful and led to trust fund surpluses that lasted until about 2009, according to the nonpartisan Peterson Foundation.
The U.S. is again facing an underfunded Social Security system. People are living longer, requiring more years of benefits, while the number of working-age contributors to payroll taxes isn't keeping up.
Is taking a page from Denmark the answer?
Many proposals to save Social Security have been making the rounds, including following in the footsteps of Denmark, which is also facing a shortfall. In late May, the country raised its retirement age to 70, the highest retirement age in Europe.
Denmark isn’t raising the retirement age right away. It is adopting a phased approach to raising the retirement age, which is tied to increases in life expectancy.
Since 2006, it has raised the retirement age every five years. Today, the retirement age sits at 67. In 2030, it will increase to 68; by 2035, it will be raised to 69. In 2040, it goes to 70 for people born after December 31, 1970.
Those in favor say aye
Proponents of raising the retirement age to 70 in the U.S. argue there are several benefits to taking a page from Denmark, including the following:
- It would reduce the shortfall by cutting the number of years that Social Security benefits are paid out.
- It would encourage people to work longer, which increases the amount of taxes collected and money going into the trust fund.
- The longer people work, the more they can potentially save for retirement.
“Retirement at 65 (the average age Americans retire) made a lot of sense when the life expectancy was 61,” says Rob Edwards, managing director of Edwards Asset Management.
“Today, Americans are living and really enjoying life well into their 80s. If we don’t update the retirement age to reflect that reality, we’ll keep putting pressure on the Social Security System.”
Raising the retirement age doesn’t work for everyone
Critics of raising the retirement age to 70 argue that the U.S. and Denmark are not the same, and therefore, what works in Denmark won’t necessarily work here.
“We have a much more unequal society than Denmark,” says Munnell. “We have a much higher poverty rate and much higher unequal income distribution rate, so an across-the-board cut by raising the retirement age is not feasible.”
According to the Organisation for Economic Co-operation and Development, the poverty rate in the U.S. is more than three times higher than in Denmark, notes Munnell. That inequality in income has a direct correlation with life expectancy.
Studies have shown that people who live longer tend to have more wealth and are more likely to be able to perform their jobs well into their 70s. Lower-income workers, particularly those who do physically taxing jobs, often have to retire early and would face a reduction in benefits if the retirement age were raised.
Some of these workers will be forced to find ways to cover the shortfall, which could mean cutting their budget or downsizing, getting part-time work, or tapping the Social Security Disability Insurance program.
The latter option would erode some of the projected cost savings from raising the full retirement age.
A balanced approach may be in order
Due to the discrepancies in life expectancy, one solution is to increase the full retirement age for those who can work longer, but keep it at 67 for those who can’t.
That would mean low earners would retain the current retirement age of 67, while it would increase for high earners.
“The bottom line is that Denmark’s increase in the retirement age reinforces the fact that we need to restore balance and confidence in our Social Security program,” says Munnell.
“But the U.S. cannot adopt the same options as Denmark because life expectancy and the gains in life expectancy vary dramatically by earnings, and our distribution of earnings is very unequal,” he said.
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Donna Fuscaldo is the retirement writer at Kiplinger.com. A writer and editor focused on retirement savings, planning, travel and lifestyle, Donna brings over two decades of experience working with publications including AARP, The Wall Street Journal, Forbes, Investopedia and HerMoney.
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