Author Topic: Retire like the French  (Read 3599 times)

FireLane

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Retire like the French
« on: January 27, 2023, 11:52:13 AM »
According to this article, the French president Emmanuel Macron wants to raise the national retirement age from 62 to 64 as part of a pension reform plan:

https://www.theatlantic.com/ideas/archive/2023/01/paris-france-retirement-pension-reform-protests/672824/

Quote
The advocates of reform in France should have more room to maneuver than most, because retirements here last an average of about 25 years, according to the Organization for Economic Cooperation and Development. That’s among the longest in Europe, where retirements even out at about 22 years, and well above the average retirement duration in the United States, where people now live for about 16 years after they stop working (measured from when most Americans start collecting Social Security, at 63).

25 years of retirement is pretty good, but I bet most of us here on this board are aiming to beat that number. I find it very motivating to treat that like a target to aim at. From now on, I'm going to say my goal in life is to retire like a French person!

However, Macron's plan is extremely unpopular. It spurred national protests and strikes, because the French put a high value on their leisure and don't want to give any of it up:

Quote
The French have not always had such high hopes for their retirement. In the 1960s, stopping work was considered a “social death,” wrote Vincent Caradec, a French sociologist who studies aging. Most workers at the time were men, who generally retired at age 65, then died at 70.

That began to change when, in 1982, the Socialist President François Mitterrand lowered the retirement age from 65 to 60. By the late 1990s, the nature of employment and life expectancy had changed so much that many people could expect 20-year stretches after they stopped working. This brought the idea that retirement should be a time of personal fulfillment and self-actualization—the so-called third age of life. (The whole phenomenon led the French journalist Danièle Laufer to write a book about the identity crisis some suffer when, after idealizing what retirement will be like, they suddenly face the reality of all that free time. “I compare it to the crisis of adolescence,” she says.)

A long retirement for all came to be seen as a basic right and a fact of life. French seniors are everywhere in Paris: roaming museums and supermarkets at midday, and hosting their grandchildren for week-long school holidays. “We’re very attached to our social model,” says Méda, the sociologist.

France sounds like a naturally Mustachian country. The French people want to work as little as possible, retire as early as possible, and enjoy life for as long as possible. And really, isn't that why we're all here too?

zolotiyeruki

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Re: Retire like the French
« Reply #1 on: February 03, 2023, 08:50:16 AM »
France sounds like a naturally Mustachian country. The French people want to work as little as possible, retire as early as possible, and enjoy life for as long as possible. And really, isn't that why we're all here too?
The trick is "where do the retirees' living expenses come from?"  If individuals have saved and accumulated enough to support their own early retirement, fantastic! 

However, we're talking about the harsh realities of a government-funded pension.  With a falling birth rate and longer life expectancy, France is facing the same problem as the US' Social Security.  In order to stay solvent, something has to give.  Either raise the retirement age, reduce payouts, or raise taxes.  Of the three, raising the retirement age is clearly the most logical and fair.  If you're going to live longer, and be able-bodied longer, you should be expected to work a bit longer to pay for your longer retirement. (or, if you're mustachian, save better during your working years to pay for an earlier retirement)

The US standard retirement age is 67.  The UK is at 65-66.  Germany's is 66 and soon increasing to 67.  So France is really the outlier here.

I guess my exit question to the protesters is this:  "Who's gonna pay for your early retirement?"

dcheesi

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Re: Retire like the French
« Reply #2 on: February 03, 2023, 10:34:56 AM »
France sounds like a naturally Mustachian country. The French people want to work as little as possible, retire as early as possible, and enjoy life for as long as possible. And really, isn't that why we're all here too?
The trick is "where do the retirees' living expenses come from?"  If individuals have saved and accumulated enough to support their own early retirement, fantastic! 

However, we're talking about the harsh realities of a government-funded pension.  With a falling birth rate and longer life expectancy, France is facing the same problem as the US' Social Security.  In order to stay solvent, something has to give.  Either raise the retirement age, reduce payouts, or raise taxes.  Of the three, raising the retirement age is clearly the most logical and fair.  If you're going to live longer, and be able-bodied longer, you should be expected to work a bit longer to pay for your longer retirement. (or, if you're mustachian, save better during your working years to pay for an earlier retirement)

The US standard retirement age is 67.  The UK is at 65-66.  Germany's is 66 and soon increasing to 67.  So France is really the outlier here.

I guess my exit question to the protesters is this:  "Who's gonna pay for your early retirement?"
And of course one of the complaints from the French is that their income & tax structures make it much harder to accumulate enough wealth to retire on your own dime, outside of the gov't pension system.

In the US, we have Social Security, but we also have 401(k) and other programs that make saving for an earlier retirement easier. And of course our taxes aren't all that high for a developed nation, so it's easier to save even in taxable accounts.

The NPR piece I heard a while back touched on this in an interview: https://www.npr.org/2023/01/19/1150075846/thousands-in-france-strike-and-march-in-protest-of-raising-the-age-of-retirement
Quote
JEAN MARC NICOLA: In the United States, you can retire before if you have enough money. But here in France, it's only one system. And so when we say age 64, it's really 64 for everybody - even for those who have begin very young.

FireLane

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Re: Retire like the French
« Reply #3 on: February 03, 2023, 12:08:56 PM »
However, we're talking about the harsh realities of a government-funded pension.  With a falling birth rate and longer life expectancy, France is facing the same problem as the US' Social Security.  In order to stay solvent, something has to give.  Either raise the retirement age, reduce payouts, or raise taxes.  Of the three, raising the retirement age is clearly the most logical and fair.  If you're going to live longer, and be able-bodied longer, you should be expected to work a bit longer to pay for your longer retirement. (or, if you're mustachian, save better during your working years to pay for an earlier retirement)

The US standard retirement age is 67.  The UK is at 65-66.  Germany's is 66 and soon increasing to 67.  So France is really the outlier here.

I guess my exit question to the protesters is this:  "Who's gonna pay for your early retirement?"

The article touches on this. It says that while France spends more on pensions than most comparable countries, it's not ballooning out of control:

Quote
The state currently spends 14 percent of GDP on public-sector pensions, compared with the 7 percent, on average, spent by other rich countries, according to the OECD. But a 2022 report by a government advisory group forecasts that, as France’s economy grows in the coming decades, the percentage of government spending on pensions won’t need to increase much, and will eventually stabilize or even decline.

14% of GDP is a lot, but not necessarily a crisis, especially if it's projected to remain stable.

It's all about the social contract, and it seems to me like the French have democratically accepted this one. While you're working, you get taxed at high rates to pay for the comfortable lives of retirees, but in exchange, you get to quit your job early and become one of those retirees.

The American social contract is different: you get taxed at low rates, but most people have to work longer, and if you're bad at saving, you'll retire in poverty or never be able to retire at all. We Mustachians have figured out a way to hack that system by being extra-good at saving, but there's no reason it should be impossible to have a society where early retirement is built in.

zolotiyeruki

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Re: Retire like the French
« Reply #4 on: February 03, 2023, 03:32:39 PM »
Quote
The state currently spends 14 percent of GDP on public-sector pensions, compared with the 7 percent, on average, spent by other rich countries, according to the OECD. But a 2022 report by a government advisory group forecasts that, as France’s economy grows in the coming decades, the percentage of government spending on pensions won’t need to increase much, and will eventually stabilize or even decline.

14% of GDP is a lot, but not necessarily a crisis, especially if it's projected to remain stable.

It's all about the social contract, and it seems to me like the French have democratically accepted this one. While you're working, you get taxed at high rates to pay for the comfortable lives of retirees, but in exchange, you get to quit your job early and become one of those retirees.

The American social contract is different: you get taxed at low rates, but most people have to work longer, and if you're bad at saving, you'll retire in poverty or never be able to retire at all. We Mustachians have figured out a way to hack that system by being extra-good at saving, but there's no reason it should be impossible to have a society where early retirement is built in.
If the french public pension system is stable, what's the impetus to raise the retirement age?

I suppose it comes down to philosophy--how comfortable (both in length and generosity) of a retirement ought a government guarantee?  The cost is the freedom of workers to choose how much to save or to spend, and bear the consequences and risks of that decision themselves.

ChpBstrd

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Re: Retire like the French
« Reply #5 on: February 27, 2023, 02:16:30 PM »
The American social contract is different: you get taxed at low rates, but most people have to work longer, and if you're bad at saving, you'll retire in poverty or never be able to retire at all. We Mustachians have figured out a way to hack that system by being extra-good at saving, but there's no reason it should be impossible to have a society where early retirement is built in.
I'll add that a French full pension is generally as much as one needs to retire on, while an American Social Security check is more typically just enough not to starve or be homeless while living in poverty. It looks like one must work a minimum of 42 years to obtain a "full" pension. Like SS, one's French pension payments are based on one's contributions over time.

I know the taxes are high in France, but the retirement math is entirely different when sequence of returns risk only applies between now and one's mid-60's. The risks of bad timing in the markets and eating dog food in retirement seem much lower. There's probably a sweet spot to FIRE where a French early retiree can earn enough to life off of for 10-20 years until the (smaller) pension kicks in. Maybe such a person would only need 20x instead of 25x?

If the french public pension system is stable, what's the impetus to raise the retirement age?

I suppose it comes down to philosophy--how comfortable (both in length and generosity) of a retirement ought a government guarantee?  The cost is the freedom of workers to choose how much to save or to spend, and bear the consequences and risks of that decision themselves.
Yes, I see it as a tradeoff between certainty and risk. With certainty, the French work long years and pay high taxes to get their pensions and nobody has to worry about falling through the cracks or being broke at 70 like we worry in the US. In the US, we take the risk that if we keep taxes low enough, our savings and high market performance will help us work fewer years or afford more luxuries in our elder years. Either that or we'll go broke and live in poverty with only a meager SS check to put food on the table each month.

The French get the luxury of not having to worry about money, but this comes at the expense of it being a bit harder to get rich (yet, notice that people still get rich in France).

I think the right way to hack these systems is to live/work in France, earning that pension, while simultaneously investing in the US, earning capital gains from companies taking advantage of the lower taxes. Then you use a small portfolio to bridge the gap to age when you can draw a small pension, instead of trying to fund all your expenses for 30-50 years like Americans do (with dependency on the stock market). I'm obviously living my life wrong!

This upends the retirement math US people are used to. Instead of a "FIRE number", a French early retiree should be thinking about an optimization curve between their portfolio returns and their pensions.

expatartist

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Re: Retire like the French
« Reply #6 on: February 27, 2023, 06:01:31 PM »
On a related tangent, high French taxes also fund a reasonably good universal healthcare system, so retirement savings don't have to take into account such high medical/insurance expenses as in the US.

daverobev

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Re: Retire like the French
« Reply #7 on: February 28, 2023, 03:38:53 AM »
French pensions are not a single unified thing. There is the basic pension, then a secondary pension. It can actually be very low for farmers.

https://www.la-retraite-en-clair.fr/depart-retraite-age-montant/calculer-retraite/montant-maximal-retraite-base

As mentioned yes, the basic pension (retraite de base) is based on the best 25 years of earnings, but in order to get the maximum you must have worked 42 years. Under that it rapidly drops (from 50% of the 'social security level', to 33% - so even if you have 25 years of maximum contributions, if you only work 25 years total you'll get 2/3 the amount vs working 42 years...).

In theory yes you can get a very nice pension here... but salaries are a lot lower. I think people tend to be on more like €1500 a month... not sure. And remember you do pay social charges on pension income as well! It's not like the UK where you don't pay National Insurance on pension income! (Looks like my guess was about right, https://manouvellevie.groupama.fr/retraite-moyenne-france - 1500 gross, 1400 net).

There are tax deferred ways to save (PER, Plan Epargne Retraite).

I thought the whole thing with US retirement was that once you're there, you *don't* have to pay insane healthcare costs? Many/most French people - all employees, for example, are forced to now - take 'top up' health insurance, which is another 50+ EUR a month (eg my retired mum is paying more than 100...).

FireLane

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Re: Retire like the French
« Reply #8 on: February 28, 2023, 09:10:08 AM »
I thought the whole thing with US retirement was that once you're there, you *don't* have to pay insane healthcare costs? Many/most French people - all employees, for example, are forced to now - take 'top up' health insurance, which is another 50+ EUR a month (eg my retired mum is paying more than 100...).

The U.S. has Medicare, which is a single-payer system for those 65 and up, but it's not free. It has several parts, each with its own set of premiums and deductibles:

https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/what-does-medicare-cost

It looks like the costs are similar to French top-up insurance, especially if you buy a private supplementary plan which covers some things that Medicare doesn't.

daverobev

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Re: Retire like the French
« Reply #9 on: March 01, 2023, 02:08:35 AM »
It looks to me like it's still a lot cheaper in France. If you have top-up there ends up being very little you have to pay out of pocket. I don't honestly really see the point of it, the amounts you pay before the state steps in is not enough to warrant paying for additional insurance in my eyes.

One thing is that glasses are expensive here if you go to an optician to have them made... but as usual, you can get them cheaper online.

For example, a doctor's visit here costs 25 EUR up front, but you get about 70% back from the state. If you have top-up, you will get the rest back except for one euro.

Some specialists charge more than the state's prescribed rate, so you only get back the percentage of the prescribed rate not the actual rate... I went to a specialist, paid 80 EUR, and got about 35 back if I remember correctly (I don't have top-up). For the family I'm sure we'd be paying more than 200 EUR in topup...

ChpBstrd

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Re: Retire like the French
« Reply #10 on: March 01, 2023, 06:55:56 AM »
For example, a doctor's visit here costs 25 EUR up front, but you get about 70% back from the state. If you have top-up, you will get the rest back except for one euro.

Some specialists charge more than the state's prescribed rate, so you only get back the percentage of the prescribed rate not the actual rate... I went to a specialist, paid 80 EUR, and got about 35 back if I remember correctly (I don't have top-up). For the family I'm sure we'd be paying more than 200 EUR in topup...
Those numbers make me want to set up a medical tourism business. In the US we expect a minimum $175USD for a doctor visit and $200USD for glasses. We have the option to pay these amounts out of a pre-tax account, but obviously we're nowhere close to fair value.

expatartist

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Re: Retire like the French
« Reply #11 on: December 04, 2023, 11:40:33 PM »
Thailand's great for medical tourism. I get annual comprehensive physical check-ups in Chiang Mai, the price has remained around US$200 for the past decade. Bonus: the food, massages, and in general the city are all great for a holiday.

For example, a doctor's visit here costs 25 EUR up front, but you get about 70% back from the state. If you have top-up, you will get the rest back except for one euro.

Some specialists charge more than the state's prescribed rate, so you only get back the percentage of the prescribed rate not the actual rate... I went to a specialist, paid 80 EUR, and got about 35 back if I remember correctly (I don't have top-up). For the family I'm sure we'd be paying more than 200 EUR in topup...
Those numbers make me want to set up a medical tourism business. In the US we expect a minimum $175USD for a doctor visit and $200USD for glasses. We have the option to pay these amounts out of a pre-tax account, but obviously we're nowhere close to fair value.

Metalcat

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Re: Retire like the French
« Reply #12 on: December 05, 2023, 05:26:51 AM »
According to this article, the French president Emmanuel Macron wants to raise the national retirement age from 62 to 64 as part of a pension reform plan:

https://www.theatlantic.com/ideas/archive/2023/01/paris-france-retirement-pension-reform-protests/672824/

Quote
The advocates of reform in France should have more room to maneuver than most, because retirements here last an average of about 25 years, according to the Organization for Economic Cooperation and Development. That’s among the longest in Europe, where retirements even out at about 22 years, and well above the average retirement duration in the United States, where people now live for about 16 years after they stop working (measured from when most Americans start collecting Social Security, at 63).

25 years of retirement is pretty good, but I bet most of us here on this board are aiming to beat that number. I find it very motivating to treat that like a target to aim at. From now on, I'm going to say my goal in life is to retire like a French person!

However, Macron's plan is extremely unpopular. It spurred national protests and strikes, because the French put a high value on their leisure and don't want to give any of it up:

Quote
The French have not always had such high hopes for their retirement. In the 1960s, stopping work was considered a “social death,” wrote Vincent Caradec, a French sociologist who studies aging. Most workers at the time were men, who generally retired at age 65, then died at 70.

That began to change when, in 1982, the Socialist President François Mitterrand lowered the retirement age from 65 to 60. By the late 1990s, the nature of employment and life expectancy had changed so much that many people could expect 20-year stretches after they stopped working. This brought the idea that retirement should be a time of personal fulfillment and self-actualization—the so-called third age of life. (The whole phenomenon led the French journalist Danièle Laufer to write a book about the identity crisis some suffer when, after idealizing what retirement will be like, they suddenly face the reality of all that free time. “I compare it to the crisis of adolescence,” she says.)

A long retirement for all came to be seen as a basic right and a fact of life. French seniors are everywhere in Paris: roaming museums and supermarkets at midday, and hosting their grandchildren for week-long school holidays. “We’re very attached to our social model,” says Méda, the sociologist.

France sounds like a naturally Mustachian country. The French people want to work as little as possible, retire as early as possible, and enjoy life for as long as possible. And really, isn't that why we're all here too?

It's also important to understand the rich French history of public protest. It's not so much that this is one thing that they're passionate about protecting, the French will protest, LOUDLY, pretty much anything you try and take away from them.

We have the same French culture in Quebec. The rest of Canada is often dismayed by how aggressively the folks in Quebec will protest things the government tries to do.

I was living in Montreal when the government tried to raise university tuition, which was about half that of the rest of the country, and the students went nuts. A lot of my classmates weren't from Quebec and thought the students were insane for protesting so aggressively since their tuition was so low. I laughed and said "how do you think they kept it so low for so long?"

It would be weird for the French *not* to protest a rise in retirement age. Public protests are a key component of their democratic process. In some countries, people don't protest unless it's a breaking point issue, but in France it's a normal part of the culture. In the 90s they had protests over the gym requirements in public schools being changed. This policy affects everyone, so the protests will be massive.