Marie Caron is 61. She lost her finance job in France last December. Her state pension starts at 63, or at 66 if she wants the full amount. So she needs another job first. She has had seven interviews this year. None led to a job. “Instead, I might end up on the streets,” she told the Journal.
For decades the deal in Europe was simple. The Journal's Tom Fairless and Noemie Bisserbe lay it out. Roughly half of each paycheck went to the state. In return came a pension, fairly comfortable, starting in your 60s and paid for life. In France that meant retiring at 62 on a pension based on past salary. The French live some of the longest lives in the world and retire among the earliest. A retirement there can run three decades.
The money comes from pay-as-you-go. Today's payroll taxes pay today's retirees. That works while workers far outnumber retirees. The baby boomers are now entering their 80s, and the margin is gone. A French government report found about a third of the Education Ministry's budget goes to pension checks for retired civil servants. At the Interior Ministry, which runs the police, pensions take 30% of spending. France's public debt reached 3.6 trillion euros this year, about $4 trillion. It was 2.2 trillion in 2017. It now tops 117% of GDP, and the French treasury pays about the same rate to borrow for ten years as Italy does.
The math that never lies
France's finance minister, Roland Lescure, says the legal retirement age has to rise. It now sits between 62 and 64. He called the increase mathematically unavoidable, in an interview with the Journal and other papers. “Demographics is the only science that never lies,” he said. Voters have fought every attempt to make them work longer, and the worry fed the protests of recent weeks. Europe runs three models. France, Italy and Spain are pure pay-as-you-go. Northern Europe built hybrids that economists see as sturdier. Germany and the U.K. sit in between. France can't just switch. Moving payroll taxes into investment funds would leave no cash for today's retirees. A 19-year-old psychology student in Paris told the Journal she doubts she'll have a pension at all.
Our read
Retirement, M10. A pension is a promise, and a promise rests on something. A pay-as-you-go promise rests on the number of workers behind each retiree and on the government's room to borrow. America's Social Security works much the same way. California's teacher and public-employee plans are built differently. They hold invested funds alongside today's contributions, which is a sturdier footing. The lesson still holds. A statutory age can move, and so can the rules in the years right before it. General planning principles, not advice for anyone in particular.
Here's where it touches your plan. Marie Caron's problem is the bridge. She stopped earning at 61 and can't collect until 63. Look up the earliest age your pension or Social Security lets you start. Then count the years between a job loss at 60 and that date. That gap is what your own savings would have to cover, and it's the number to check this week. Count how many months of spending sit outside the pension, in an account you can reach. You don't start looking for the umbrella once the rain hits. Bring your plan's start ages to your next review and we'll size the bridge.