How is America planning for retirement? A challenge for both elderly and young people, author Martha Sherwood discusses some of the pit falls of raising the minimum age for collecting Social Security benefits in the United States.
Proposals to raise the minimum age for collecting both minimum and full Social Security benefits in are gaining increasing traction across the political spectrum. This looks like a comparatively painless way to address an intractable underlying problem: a large birth cohort entering retirement in the middle of a recession, which pushed forward by many years the date at which benefits exceeded payroll taxes. The Federal Government raised payroll taxes and supposedly stockpiled a surplus during the 1990s in anticipation of just such a crunch, but unfortunately they loaned the surplus to themselves, spent it on other programs, and are now faced with empty coffers and the prospect of having to borrow money to cover their debt to today’s retirees.
Life expectancy at age 65 increased, by a little less than five years, in America between 1940 and 2007, but the main reason so many people are now collecting Social Security, or shortly will be, is the large birth cohort now entering retirement. That birth cohort cannot be ignored. If the Social Security and Medicare systems cannot provide benefits sufficient to cover an adequate standard of living and the level of medical care people have come to expect, for that proportion of retirees who are dependent on it, then something has to give. There don’t seem to be accurate figures anywhere on what proportion of older Americans cannot realistically expect to continue working and have no significant resources other than Social Security and Medicare to fall back on, but if you add the roughly 20% who have significant health issues, people whose incomes have fallen below subsistence level before retirement and are counting on Social Security and Medicare to substitute for other social safety net programs, and discouraged workers, it’s a large and growing number of people.
Charging the maintenance of these people, who contributed faithfully to the retirement program which is now broke, to Social Security Disability, or extended unemployment, or entitlement programs such as section 8 housing, or heavily subsidized private insurance under “Obamacare” does not save the public any money and multiplies the bureaucratic headaches. The alternative is to tolerate high levels of poverty and unmet healthcare needs among the elderly. This would, indeed, have the effect of reducing life expectancy and therefore balancing the Social Security budget. One would hope that our country had a robust enough social conscience to reject such a solution.
Overlooked by most commentators, but surely a factor in the current Social Security deficit, is the shorter working life of the average worker due to escalating education requirements, and, in the current recession, the large number of young people who have been unable to enter the work force at all. Unless the work force is actually growing, older people who postpone retirement are occupying their children’s jobs, forcing the children to postpone having families of their own and depressing the consumer economy.
People who argue for raising the retirement age will claim that people in their sixties are, for the most part, better able to work than their parents were, because the percentage of them reporting poor health has declined from 33 to 22%, the share of physically demanding jobs has fallen from 57% to 46%, and the percentage of adults 55 to 64 who are college graduates rose from 16 to 32%. There is the assumption that anyone who can’t work will be able to collect Social Security disability benefits and that anyone who can work will be able to find a job at a living wage.
The recession has already produced a spike in applications for disability benefits among people with a variety of disabilities, none an absolute barrier to employment, who have been laid off and have no hope of competing against a horde of younger job applicants. Employers, including public employers, are trimming older workers. For persons 62 and older, Social Security is the main safety net in the face of being downsized. Without this fallback, lower income workers who have no retirement savings would end up in actual poverty. It is all very well to say that people should be saving more for retirement, but at present median family income allows for very little slack in a family budget. Those people of the Baby Boomer generation who did save for retirement have seen home equity and investments gutted by forces beyond their control or ability to anticipate, and many have also been forced to draw on the remainder early because of unemployment or a health crisis.
The very rapid rate of technological change in the workplace creates difficulties for older workers, especially when employers invest little in training existing employees, preferring to hire new blood which has paid for its training out of pocket. Most desk jobs now require a large array of computer skills that are second nature to a twenty-something but difficult for an older person to acquire. Jobs may not be as physically demanding as they once were but the demand to constantly learn new ways of doing things has escalated, and few sixty year old workers have a learning curve as steep as a person half their age.
The people advocating raising the retirement age are making many assumptions, including projecting an economic recovery which so far has failed to materialize. One way or another, the system is going to have to produce a way of distributing intergenerational benefits and obligations in a way that is sustainable and affordable, across the entire spectrum of the American population. Raising the Social Security retirement age and throwing a large number of older people onto social safety net programs that are even more stressed is not the answer.
Further Reading:
Urban Institute: Fact Sheet on Retirement Policy
Photo Credit:
Microsoft Images
Recent Martha Sherwood Articles:
- The Year of the Jackpot
- The Novel of My Mother's Past - And Mine
- Has America Lost the Cold War?
- The Grief of Downsizing
- Immunological Paralysis: A Reason for Concern?
Thank you for this very concise but insightful analysis of the situation we face here in the U.S. The majority of voters here have voted for politicians over the years who pillaged the system and its taxpayer-funded cash to give “free stuff” to the voters in return for being re-elected time after time. Now the consequences of those foolish choices are coming home to roost and the voters have no one to blame but themselves. The politicians, who reaped enormous personal benefits and power from all this, are long gone in their own, separately-funded-at-taxpayer-expense, retirement system.
– Tim
Tim… Yes, you’re quite right. Our politicians have offered far too many handouts in exchange for being reelected. Also, as the number of recipients (those on the government dole) increases, this sad situation becomes more and more systemic. We’ll thus have a very difficult time returning to fiscal responsibility. Bill
Unfortunately, there’s no way around it — our Social Security system, as it stands today, is unsustainable. Our government has simply made promises which it cannot fulfill. Though no one will like it, the retirement age will increase and benefits will decrease. Bill