The Social Security retirement age: Who’s really living longer?

From Washington Policy Watch:

president john adams
Second President of the United States John Adams lived to age 90, longer than all but two U.S. Presidents.

In 1983, the so-called “Reagan Reforms” made some big changes to Social Security including eliminating the survivors benefits for college students, boosting the payroll tax, and raising the retirement age from 65 to 67.  As a result, anyone born after 1960 must now wait until age 67 to receive their full Social Security retirement benefits.

But now some conservative thought-leaders and wealthy CEOs are again championing lifting the retirement age, this time to 70. Their argument probably sounds familiar to anyone who remembers the 1983 reforms: as people live longer, the retirement age should adjust upward. It sounds reasonable to people who have white collar jobs working in air-conditioned offices – but for millions of working Americans, the reality is much different.

One of the most common arguments in favor of raising the retirement age is that average life expectancy has shot up since the inception of Social Security, from age 60 in 1930 to nearly 79 today. Don’t be misled. The change in overall life expectancy mostly reflects lower infant mortality, not longer lifespans for adults.

In 1939, infant mortality rates were extremely high, but once age 65 the average American could expect to live another 13.4 years, or to age 78. Today, better health care and fewer infant deaths means overall life expectancy has gone up. But life expectancy after age 65 – a more accurate way to predict how long people are really living in retirement – hasn’t changed nearly as much.

As of 2008, the average American who makes it to age 65 could expect to live 19.6 years. That’s just 6 years longer than in 1939, and less than 2 years longer than in 1979 – and even that number overgeneralizes, because it ignores other factors that affect life expectancy, including gender, race, and income. A Social Security Administration study found income inequality plays a big role in life expectancy. For workers in the top half of the earnings distribution, average life expectancy is 86.5, but for those in the bottom half it’s just 81 — a gap of more than 5 years that continues to grow.

ave life expectancy at 65

Race is another important factor for life expectancy at age 65. The most recent data show black men reaching age 65 have an average life expectancy of just 81, three and-a-half years less than the average for the total U.S. population. Total life expectancy for African Americans is 74.5, while it is 78.8 for white Americans.

American workers that are living longer are, on average, better educated, more affluent, and white. Further raising the retirement age will undoubtedly have a profoundly negative impact on millions of Americans, primarily those with less education, lower earnings, and racial minorities.

There’s nothing ‘courageous’ about raising the Social Security retirement age

PHOTO: AFP

Via Ezra Klein at the Washington Post:

In an interview with Dylan Matthews, Nobel laureate economist and Social Security expert Peter Diamond  unloads on those who think the simplest and fairest way to “fix” Social Security is to raise the retirement age, which would particularly hurt seniors who retire early at age 62.

What do we know about the people who retire at 62? On average, they have a shorter life expectancy and lower earnings than people retiring at later ages. If anyone stood up and said, ‘Instead of doing uniform across the board cuts, let’s make them a little worse for people who have shorter life expectancies and lower earnings,’ they’d be laughed at.

Of course, those who say we should raise the Social Security retirement age — either the age of eligibility or the age for full benefits — don’t get laughed at. It’s considered a very thoughtful, courageous effort to deal with our entitlement programs. People who mention it often make a joke of how brave they’re being. For instance, here’s New Jersey Gov. Chris Christie (R) at an American Enterprise Institute event:

You are going to have to raise the retirement age for Social Security! Whoa! I just said it and I am still standing here. I did not vaporize into the carpeting.

Big applause, of course.

This is one of Washington, D.C.’s more disagreeable conceits. The people wandering around calling for a higher retirement age will never feel the bite of the policy. Think tankers and politicians and columnists don’t retire at age 62, or even age 65. They love their work, which mostly requires sitting down in air-conditioned rooms. They stick around pretty much until they’re about to die.

The courage it takes to call for a higher retirement age is the courage to say that other people who don’t have it as good as you do should be the ones to pay to shore up Social Security. It’s the same kind of courage as a poor person calling for higher taxes on the rich, or a sitting congressman calling for a war he’ll never have to fight in.

Meanwhile, you could do more to erase Social Security’s shortfall by simply lifting the payroll tax cap. A lot more. According to the Congressional Budget Office, raising the federal retirement age to 70 would solve about half of Social Security funding problem, while lifting the payroll tax cap would solve all of it.

As it happens, lifting the payroll tax cap would also end up costing eminent think tankers and journalists and lobbyists and politicians a whole lot of money. Perhaps consequentially, it’s a rather less popular policy idea in this town. Many consider it an easy way out, even though it would be much harder on them. Courage and sacrifice for thee, but not for me.

Ezra Klein on Social Security: 8 facts and 3 thoughts

From Ezra Klein at the Washington Post:

Earlier, I criticized Alan Simpson for not knowing — and, more to the point, being actively hostile to — accurate demographic data about Social Security, but perhaps it’d be more useful to run through some of the numbers I find it helpful to keep in mind while writing about the issue:

1) Over the next 75 years, Social Security’s shortfall is equal to about 0.7 percent of GDP. Source (PDF).

2) For the average 65-year-old retiring in 2010, Social Security replaced about 40 percent of working-age earnings. That “replacement rate” is scheduled to fall to 31 percent in the coming decades. Source.

3) Social Security’s replacement rate puts it 26th among 30 Organization for Economic Cooperation and Development nations for workers with average earnings. Source.

4) Without Social Security, 45 percent of seniors would be under the poverty line. With Social Security, 10 percent of seniors are under the poverty line. Source.

Click here to read the full article »

Improving Social Security’s Benefits is Critical to Economic Recovery and Security

From the National Academy of Social Insurance:

Alex Stone, Communications Manager, EOI

By Alex Stone, Communications Manager, Economic Opportunity Institute

At NASI’s 2011 annual conference, the session “Should We Adopt the Social Security Recommendations of the Fiscal Commission Co-Chairs?” demonstrated the complexity of the Social Security reform debate.

Charles Blahous, a Social Security trustee, argued in favor of adopting the Fiscal Commission proposals, which he characterized as a “reasonable compromise” because it utilizes ideas from both sides of the aisle.

Andy Stern, a member of the Fiscal Commission, ultimately voted against the co-chairs’ proposal. He emphasized that while a crisis exists, it is of middle class retirement security in general – not Social Security – due to shrinking personal savings, fewer pension plans, and the erosion of family-wage jobs.

Janice Gregory, NASI President, then pointed out major flaws in the Fiscal Commission’s proposal, arguing that it goes too far in the direction of benefit reduction, and unfairly characterizes Social Security as contributing to the deficit. Gregory also expressed concern that the proposal’s dramatic changes are unwarranted because Social Security shows stable long-term cost projections and a large trust fund.

Despite disagreeing on the proposal, the panelists were able to find common ground on the value of maintaining Social Security’s benefit-payment link, and its importance to lower- and middle-income Americans. These two points are critical measures of success for the Social Security program, but weren’t given equal value in the Fiscal Commission’s final proposal.

Strengthening Social Security was never the main charge of the aptly-named Fiscal Commission. Rather, the foremost concern of its co-chairmen was to rein in the deficit, and their proposal reflects that ultimate goal. While their proposal maintained the benefit-payment linkage, they recommended increasing the retirement age for future generations and adopting a new COLA formula that would lower benefits.

Further, the Fiscal Commission did a disservice to Social Security by taking it up as a deficit-reduction measure. This reinforces the false notion that Social Security contributes to the deficit and needs ‘saving.’ In fact, the Social Security Trustees project that in 2037, the trust fund will be expended – at which point payroll taxes would cover 78% of benefits. Lifting the payroll cap now, from its current $106,800, is an easy solution to that problem. It would maintain the benefit-payment link for nearly every American worker, and allow Social Security to expand benefits to lower- and middle-class recipients.

The real charge of the Fiscal Commission – deficit reduction – is an important one, but a robust middle class must exist to drive innovation and fuel our economy. And if deficit reduction were truly a top priority of our elected officials, it’s unlikely that the recent tax cut extension would have been approved.

Economic and social policies of the past century have fueled the growth of the American middle class. A strong middle-class will help to pull us out of this, and future, economic slumps. But in order to do so, families must be able to spend their money on higher education, saving for retirement and purchasing a home – not supporting their elderly parents and paying for costly medical care. Social Security is not a retirement program, nor a replacement for one. It’s a poverty prevention program, and one of the most successful in American history.

In the end, the debate over Social Security is a debate over how we will measure success in America. Will it be with basic accounting principles, stock values, and long-term economic projections? Or will it be a more refined approach – such as triple bottom line accounting – which determines success using both economic and social measures of good? Our collective success is inextricably linked to Social Security. Improving benefits now is crucial, both for the nation’s short-term economic recovery, and for the long-term economic security of our families and communities.

Click here to view a video of the session, “Should We Adopt the Social Security Recommendations of the Fiscal Commission Co-Chairs.

Social Security is fine for at least 26 years – here’s the permanent fix

From the Huffington Post:

By Robert Reich

New Jersey Governor Chris Christie, a Republican presidential hopeful, says in order to “save” Social Security the retirement age should be raised. The media are congratulating him for his putative “courage.” Deficit hawks are proclaiming Social Security one of the big entitlements that has to be cut in order to reduce the budget deficit.

This is all baloney.

In a former life I was a trustee of the Social Security trust fund. So let me set the record straight.  Continue reading “Social Security is fine for at least 26 years – here’s the permanent fix”

Why raising the Social Security retirement age means millions of Americans will never see a check

Rep. Paul Ryan (R-WI)

Few Americans pay into Social Security thinking they won’t live to see some benefit from it when they retire – but if Rep. Paul Ryan (R-WI) has his way, that would actually be the case for millions of people.

American workers pay 6.2% of their paycheck into Social Security (well, 4.2% until the recent payroll tax reduction expires in a year). In return they are guaranteed a modicum of economic dignity in retirement, assistance if they become disabled, and peace of mind knowing their children and spouse will be taken care of if they die unexpectedly.

But Rep. Ryan’s proposal to raise the retirement age to at- or near-life expectancy levels for millions of Americans would mean many people would never see a check:

When you crunch the numbers, the conclusions are stark. The average life expectancy of an African-American in the United States is 67 years. And that’s for all African-Americans, regardless of social class. The average life expectancy of an African-American unskilled manual laborer would undoubtedly be even lower — certainly low enough that a retirement age as high as 70 would discriminate profoundly.

And it gets worse. Although life-span expectancies for all groups have been growing for the last century, the gains have been much stronger for the wealthier classes over the last few decades. Just as income inequality has grown, so has life-span inequality. A study published by the Congressional Budget Office in 2008 found that “there is a growing disparity in life expectancy between individuals with high and low income and between those with more and less education.”

Read full article at Salon.com

Two simple ways you can make sure Obama keeps his word on Social Security

During his campaign, then-candidate Obama made his support for Social Security crystal clear:

“I do not want to cut benefits or raise the retirement age. I believe there are a number of ways we can make Social Security solvent that do not involve placing these added burdens on seniors.” Sen. Barak Obama, Op-ed in Quad City Times, Sept. 21, 2007

But it now appears President Obama may actually embrace Social Security cuts in his upcoming State of the Union address. And doing so would spell economic disaster for millions of Americans. Continue reading “Two simple ways you can make sure Obama keeps his word on Social Security”