Retirement Age

Endorsement

This idea is currently under discussion, incorporated in a number of plans.  We don't like it because increasing life expectancy is not a driver of the systems financial problems.  The solutoin normally takes so long that these changes do not even move the date of insolvency. 

There isn’t any substantive difference between reducing benefits by insolvency and reducing benefits by law.  This approach basically does nothing more than explains to future retirees how their benefits will be cut.  

What Do The Trustees Say

Research from the Social Security Administration says that the life prospects of a 67 year-old in 2050 is roughly the same as the life prospects of a 65 year-old in 2000.  2000 is the last time that we started gradually increasing retirement age.   (Actuarial Study 120)

There are many different ways to increase retirement age.  They vary by kick-in date, adjustment rate, and full retirement age.  The Social Security Administration projections on age-adjustment are here.  

How Does It Work?

In terms of gradual, it generally means that people 55 and older would be unaffected.  In 2015, that means that changes start in 2022 when someone 55 turns 62.  A typical rate of change is 1 month every 2 years.  So to get full retirement age to 68, will take until 2046.  The SSA projects that change will erase about 12% of the 75 year shortfall.  The research is from 2014 which will overstate the results somewhat.  

Strengths

Unless we can show that people are living in retirement longer, this policy option has zero merit.  We are simply replacing benefit cuts by insolvency with benefit cuts by law.  It has zero incremental value. 

Indexing retirement age to a benchmark of life expectancy has more value, depending upon what measure of life expectancy is used. 

Weaknesses

Increasing the retirement age of workers by 2 years equates to a 13% benefit cut.  People will continue to retire at 67 or some earlier age.  They will do so with lower benefits.  This change would make sense if life expectancy was a driver of the system's problems.  If you have adequate research, send it to us.

Today average workers lose money on the system.  This solution is that they should lose even more.  This policy option does little more than defines the shape of benefit cuts.  Unless age becomes connected more benefits, we aren't fixing Social Security.  We are paying for a broken system.

By and large, younger workers are better off accepting the 25% reductions caused by insolvency than taking higher age, and benefit cuts that will still come with insolvency. 

Distortions

When policitians say that  "The answer is based on data which shows life expectancy increasing from 63 in 1940 to more than 77 today".  They are talking about life expectancy of a baby, not a retiree.  This information is useless.  The primary driver of the growth in life expectancy is decreasing infant mortality.  This makes Social Security more solvent rather than less. 

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