Retirement Age Rising to 71? Plan Your Early Exit
What do you think about retiring in your 70s? Photo by Huy Phan on Unsplash.
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Why Europe’s Rising Retirement Ages Matter to You
Spain’s BBVA Report: Retirees May Need to Work Until 71
A new BBVA-IVIE study warns that today’s Spanish Millennials may have to work until age 71 to keep the same standard of living current retirees enjoy. Over the last few days, numerous Spanish-speaking news outlets were echoing the latest research findings from BBVA—a Spanish multinational banking group. Although this time the news came from Spain, the reality is that many Western countries are bracing for similar issues with regards to their public pension systems. Today’s post focuses on Spain—but is relevant for most readers across Europe and other countries facing aging populations.
What’s the problem with pensions in Europe? Too few workers now fund ever-more retirees—a demographic squeeze driven by low birth-rates and longer life spans—while politicians on four-year election cycles court the growing bloc of older voters and postpone real social-security reform, leaving younger contributors to pick up the bill. By 2050, Europe may have fewer than two workers supporting every pensioner—a ratio experts call the continent’s “ageing crisis.”
Later Workforce Entry & Pension Cuts Explain the 71-Age
There is nothing really surprising about BBVA’s findings. In simple terms, they are signaling that if workers wish to maintain a similar quality pension as those enjoyed today they will likely have to extend their working life to about 71 from 67 today, assuming their first meaningful contributions are made at age 30 and they still want a 90% replacement rate from their previous salary. The reasons are two-fold.
Firstly, young citizens are entering the workforce later and later. INE data show youth employment has crashed from 59% in 2007 to just 43% today, slashing early-career pension contributions. And the later a worker starts contributing to the social security system—all things equal—the later they will have to contribute to receive a similar pension. Until here, the math seems fair—you can’t expect to contribute less and earn the same.
Secondly, ongoing and expected pension system reforms over the coming years will continue to increase pressure on young workers. The poor financial state of the Spanish pension system means there will be inevitable increases in contributions in order to keep the system afloat. These higher contributions will be burdened by the younger generations.
This is one of the generations that will pick up the tab to fix the public-pension system. Photo by Brooke Cagle on Unsplash.
To shore up Spain’s pension reserve fund—“la hucha de las pensiones”—lawmakers are discussing three major reforms. Resulting from these changes, future workers who contribute to the system for at least 37 years—the minimum number of years required to get a “full” pension today—are expected to have a comparably lower pension than the one retirees enjoy today. There are at least three main ideas on the table—all of which translate to either receiving a lower pension in the future or having to work more years to receive a comparable one to today’s. The main draft proposals aim to:
consider the last 35 years of contributions to calculate the pension—instead of the 27 years that are used today
raise the minimum contribution history from 37 to 40 years
include an “intergenerational sustainability factor”, which, like some other European countries, seeks to link the pension calculation to life expectancy
I’m not here to argue with the math. There clearly need to be changes if the public pension systems if people wish for them to continue working in the future. But at the same time, it’s understandably frustrating for younger generations that this adjustment is fully absorbed by them—and not by the older, more financially-stable generations. Of course, politicians would never tell the powerful retiree electorate that they should adjust their pensions as well. This topic is completely taboo across many European countries—it’s much easier is to just let future generations sort out the mess.
Why 40-Year Contribution Careers No Longer Add Up
A seamless 37 or 40-year contribution record is becoming policy fantasy. Today, the official retirement age in Spain is 67—if you’ve logged at least 37 contribution years—but that benchmark is becoming unrealistic for many new entrants. The system assumes you’ll rack up roughly four decades of consistent contributions by age 67, yet youth unemployment, gig work, study, and other life events leave most people with patchy records that fall well short of a consistent 40-year contribution record.
My own record proves the point: 13 years out of university and my contribution timeline already looks like Swiss cheese. I’ve been unemployed twice (in 2 different countries) and have also gone through parental leave twice. Granted, you get some “credit” during these events, but a lower amount than you would while working. If my record weren’t patchy enough, I’ve worked in 4 different countries and I recently quit my job to go down a more entrepreneurial trajectory. Who knows what my public pension will look like in the future.
Longer schooling and a delayed career launch mean a later first payslip. As mentioned earlier, people enter the workforce later on average. Many professional tracks also require unpaid internships or low-paid traineeships. Many Spaniards—and Europeans—don’t secure a stable contract until around age 30, sacrificing five years of pensionable earnings. This translates to either a lower pension or to having to work extra years—perhaps until 71, but maybe even later until 75. This highlights how important it is to not rely exclusively on the public pension system.
Are we sure we want 40+ years of this? Photo by Israel Andrade on Unsplash.
Using the FIRE Strategy to Beat Pension Shortfalls
Of course, it’s not only Spain. Earlier this summer, Denmark announced that it will officially push its retirement age to 70—the highest threshold in Europe. Little by little, this trickle of pension changes and alerts will become a steady torrent. There are only three meaningful levers to work with here—either to increase the amount of pension contributions, to decrease the amount of pension received, or to work longer. Expect a combination of the three.
But do we really want to substantially increase the length of our working careers doing something we find unfulfilling? According to Gallup, 77% of the global workforce are dissatisfied and don’t find meaning in their jobs. In light of these statistics and the trends elaborated on above, I think it’s unwise to rely on what many countries are currently offering. Instead, we need to actively take control of our finances, and this includes proactively planning for the retirement we envision.
The FIRE approach—Financial Independence, Retire Early—flips the script on its head: by finding clever ways to reduce your monthly expenses that don’t substantially impact your quality of life, you can ramp up your savings rate. Channel those savings into low-cost, globally diversified index funds and you build a personal pension that can accelerate early retirement.
It’s important to remember that your savings rate holds a non-linear relationship with the years left to retirement. If you just left college with no net worth to your name, land a job, and start investing by implementing a 15% savings rate, you could retire in about 35 years, assuming a 7% real return on your investments. Ramp this up to 25% and you could exit the workforce in 27 years, 8 years earlier. Increase it to 50% and you could be out in only 15 years.
Figure 1. Relation between savings rate and years to retirement. Graph assumes no previous savings, a 7% return on investment, and 4% safe withdrawal rate.
Curious about your numbers? Run them through our free Financial Independence Calculator to see your projected Financial Independence (FI) date. By entering a few data points like your current investments, age, salary, expenses, etc., the tool outputs an estimate of what the timeline to early retirement could look based on your situation. Below is a screenshot of the output of the tool (Figure 2).
Figure 2. Screenshot of the output of our new Financial Independence Calculator. Enter some basic data reflecting your finances and receive an estimated pathway to financial independence. Play around by adjusting your monthly expenses now and in retirement to optimize your trajectory towards early retirement.
Can’t stomach a 50% savings rate or simply don’t have the ability to implement such a high savings rate to get there? That’s fine. If that is the case, I’d recommend considering more relaxed approaches to reach early retirement that we’ve covered in past articles, e.g., Barista FIRE or Coast FIRE.
Health, Wealth, and Opportunity Costs of Retiring at 71
Peak health and energy typically span ages 25 to 55, not 65 plus. Deferring freedom to 71 can feel like trading hiking trails for doctors’ waiting rooms. As Bill Perkins argues in Die With Zero our lives should be optimized to strive for maximum fulfillment, and the experiences that lead to maximum fulfillment take place disproportionately while you are young and healthy. Therefore, don’t work away your healthy years in return for an uncertain pension promise. Take control of your own investment journey instead and aspire to retire early on your own terms.
Imagine a 70-year-old nurse lifting patients, or a 73-year-old software developer coding at 2 a.m.—hardly sustainable. Many jobs become really difficult beyond a certain age—if not impossible or even dangerous. Even if you belong to the minority that finds fulfillment in your job today, it doesn’t mean you will still enjoy it in your late 60s or early 70s. Even if you still do, you may have other interests and passions in life you wish to pursue instead. Those extra 5-8 working years—or even more if you compare it to an early retirement timeline—also have an opportunity cost: the summers missed with your grandchildren, the travels postponed to unhealthier years in the future, or hobbies or creative interests that were unattended.
Final Takeaway: Secure Freedom Years Before State Pension Age
While Spain’s legal retirement age is still 67, the numbers now suggest you’ll need to work until around 71—or beyond—to secure a pension that replaces a meaningful share of your final salary.
The BBVA-IVIE projection isn’t destiny, but it is a red warning light. Under current rules, someone who doesn’t start contributing until 30 would need roughly four extra years in the labour market (retiring around 71) to claw back a 90 % pension. If the discussed reforms take hold—longer calculation windows, a 40-year minimum contribution period, sustainability factors—the same profile could need eight more working years to secure an 80% replacement rate—amazingly, reaching age 75.
It’s hard to argue against some of the core assumptions underpinning these BBVA projections. Demographics set the public-pension math, but you can “hack” personal retirement math with a high savings rate, index-fund investing, and even geographic arbitrage.
Don’t rely on public pension schemes that are designed by professionals responding to 4-year re-election cycles and who prioritize today’s older generations. Pursue financial independence instead to regain the agency needed to design a life that optimizes for fulfillment. Aim to retire at least a decade ahead of the conventional date to enjoy the post-working phase of life while you are still relatively young and healthy.
If you enjoyed today’s post, I think you’ll also enjoy our article covering alternative approaches to traditional FIRE—Barista FIRE and Coast FIRE—or our post on cutting your FIRE timeline by 10 years thanks to geographic arbitrage. Didn’t find what you were looking for? Check out our most recent articles further below (beneath the FAQs section).
Your turn: What’s your plan to avoid working until 71—or even 75? Drop a comment with your thoughts, worries, or strategy!
Frequently Asked Questions (FAQs)
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A shrinking workforce is funding a record-high retiree population, eroding pay-as-you-go schemes. Low birth-rates and longer life spans widen the gap every year.
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Later career entry plus tighter benefit formulas mean today’s 30-year-old starters need roughly 41 contribution years for a 90% pension. That pushes retirement toward age 71.
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Draft reforms would lift the minimum from 37 to about 40 years and stretch the salary-averaging window to 35 years. Fewer years worked = lower payout.
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Every missing contribution year lowers your average earnings base and total years counted, forcing you either to accept a smaller pension or work longer.
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FIRE (Financial Independence, Retire Early) uses high saving rates, index-fund investing, and frugal living to build a private “personal pension,” cutting reliance on state schemes.
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Yes—legislation now phases Denmark’s pension age to 70 by 2040, the highest statutory age in Europe, underscoring a continent-wide trend.
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Working into your 70s means trading peak-health years for time spent on the job, which can limit travel, hobbies, and active grand-parenting. The opportunity cost is steep: fewer vivid “memory-dividend” experiences and more age-related fatigue just as freedom finally arrives.
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