The number of people contributing to state pensions has fallen to its lowest level in a decade after nearly 6 million Spaniards lost their jobs and stopped paying into the system, which supports 9 million pensioners.That forced the government, which is still struggling with a recession and budget cuts as it tries to reduce its deficit, to twice tap its social security reserve fund in July to help with extra summer retirement payments.
Spain’s plan is sensible, and American cities should also consider making such a move. Like Social Security, a number of public pension plans were designed for a time when workers’ lifespans were much shorter. People relied on pensions for support during the relatively brief period between retirement and death, not for maintaining their pre-retirement standard of living for twenty or thirty years after they’ve finished working. Plans like Spain’s would encourage workers to work longer if they want to receive the higher benefits they expect, even if the retirement age hasn’t been raised. Fortunately, modern medicine and the shift away from physically demanding manual labor jobs toward a service economy has made it easier than ever before for people to work well into their 60s and 70s. It’s time that our retirement systems adjust.[Spanish flag image courtesy of Shutterstock]