Russians Don’t Want Their Pensions Touched Either!

Early RetirementWe’ve recently written a lot about the U.S. Social Security program and the long-term funding problems it faces. We’ve outlined the problem, talked about potential solutions, and discussed how I’m thinking about Social Security in the context of our quest for financial independence and early retirement.

While it won’t solve any of our domestic problems, it’s interesting to note the U.S. is not the only country where demographic changes are having a major impact on how politicians are thinking about retirement.

Last week, Bloomberg posted an article noting that Russian President Vladimir Putin has faced criticism at home following a proposed plan to raise retirement ages in his country he originally announced in June.

The highlights of the Bloomberg article by Olga Tanas, Ilya Arkhipov, and Andrey Biryukov sound very similar to what we’re experiencing in the U.S. today, despite the differences in our countries.

The number of workers to retirees in Russia has been declining, similar to what’s been happening in the United States. Because of these demographic changes, the initial plan called for increasing the retirement age for Russian men to 65 from 60 by 2028 and raising the retirement age for Russian women to 63 from 55 by 2034.

Russia’s current pension ages are the lowest in Europe, but the proposal still has contributed to approval ratings for Putin and his government falling to their lowest levels in four years.

After the Bloomberg article was published, Putin scaled back the proposed retirement age for women to 60 from 63, but did not change the proposed increase in the retirement age for men. According to CBS News, Putin noted last week that “the reform was necessary and “cannot be put off any longer.” Without increasing the retirement age, Putin said Russia’s pension system “would crack and eventually collapse.””

Putin appealed to the minds of Russian citizens during his televised address to the country, noting that “I underscore once again that we have to make a difficult, complicated, but necessary decision. I ask you to be understanding about this.”

Tensions remained high following Putin’s speech, however, with thousands of Russian demonstrators taking to the streets across the country to protest the proposed changes. Additional protests are expected this weekend, although one of the primary opposition leaders, who had been organizing a nationwide protest, was sent to jail last week.

While I don’t agree with many of Putin’s policies or the strong-arm tactics he has used over the past couple decades, I have a grudging respect for his willingness to try to make the fiscally responsible decision for his country. Given his grip on power in Russia, he probably has a greater probability of success than an American politician attempting to enact similar reforms to our Social Security system.

It will be interesting to follow the news from Russia regarding the proposed changes to their pension system.

And I’m still hopeful that at some point in the not so distant future, U.S. legislators will begin working on a bipartisan basis to enact a better long-term solution for our Social Security program. Before we get to the point where five to eight year increases in the retirement age are the only answer to close the funding gap!

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