Ever since the members of the U.S Business Roundtable presented their plan to gradually raise the retirement age to seventy last year, the political and economic realm has been on fire with both support and recrimination. This fervor has only intensified after a recently released report by the Congressional Budget Office (CBO) which stated that, holding all else constant, the combined Disability Insurance (DI) and Old-Age and Survivors Insurance (OASI) trust funds would be exhausted by 2030. In addition to this, a summary released by the Social Security Administration (SSA) announced that if no steps are taken to remedy the challenges facing Social Security and Medicare, the SSA would only be able to pay around seventy-five percent of scheduled benefits using tax income starting in 2033.
Liberal publications and economists have roasted the idea, stating that the most oft-raised justification for raising the retirement age, the increased life expectancy of today’s population, ignores the reality that life expectancy has risen much more for the rich than the poor. Similarly, publications such as Mother Jones declare that raising the retirement age would result in “fewer benefits for lower-income workers who typically die younger than those who make more.” Liberal think tanks are also slamming the idea of raising the retirement age. A study at the Center for Economic and Policy Research concluded, “raising the retirement age…would imply a substantial upward distribution of wealth.” Conservative think tanks, on the other hand, have lauded the idea.
The American Enterprise Institute (AEI) released a report recommending raising, at the very least, Social Security’s Early Retirement Age in an effort to prolong the ability of the SSA to pay full benefits. Another report released by the Heritage Foundation recommended raising both the early retirement age as well as the normal retirement age. This report also recognized the additional challenges presented to workers who may wish to continue working but cannot due to health issues related to physically demanding jobs or a low socio-economic status, both of which may contribute to a higher dispensation towards incidents of disability. For these people, it recommended that they “should receive benefits through Social Security’s Disability Insurance (SSDI) program until they reach the [Early Eligibility Age].”
So who’s right? We know that the last of the silent generation and the majority of the baby boomer generation are approaching retirement age, resulting in the active workforce shrinking and the number of people collecting social security rapidly rising. It is also a generally accepted fact that workers over the age of fifty have much more trouble getting new jobs and are among the first to go when businesses start downsizing. Furthermore, several studies, such as this one by the Institute of Economic Affairs in the United Kingdom, have linked retirement and increased depression.
While hiking the normal retirement age may disadvantage some workers, doing so will prolong the ability of the government to pay the full amount of scheduled benefits. This will allow many more workers to receive their full benefits—or at least a portion of it for those that elect to go into early retirement—while also providing the opportunity to work a few more years and save up a little more money. Of course, this would still be only a stop-gap measure, not a complete solution. While lifting the retirement age is a viable option, it should definitely be considered in conjunction with other alternatives, such as retirement fund and savings education, incentives for workplace retirement funds, raising the Federal Insurance Contributions Act (FICA) cap and modifying cost of living adjustments. Hopefully, if nothing else, the whole debate over this issue will help educate current and future workers on how important it is to begin saving for their retirement as soon as possible.
So whether your goal is to work until the day you die or you’re happily anticipating the day you hit early retirement, one simple fact remains true: if you’re under fifty, don’t expect to be able to cover all of your expenses with a full percentage Social Security payment because, unless Congress and the Administration make some changes, that won’t be an option.