4 Hazards of Raising the Retirement Age

Dec 6, 2019 / Amanda Chase, Horsesmouth Assistant Editor

According to a CNBC report, although Congress has done nothing substantive to address the need to secure better future funding for Social Security, there is the possibility that politicians may seek a familiar remedy: raising the retirement age. After all, lifespans have lengthened and health care, however inaccessible it may be to many, has improved in lots of ways. It might seem logical to compel workers to stay on the job longer before they can retire and start drawing on the Social Security benefits they’ve already spent many years paying into.

If the age is raised to 69, as is talked about currently, there will be consequences—and not just the ones politicians may be aiming for. Since the law of unintended consequences will undoubtedly weigh in on any such action, according to the report, here are four potential effects such a “solution” may have.

1. People are financially unprepared for later retirement. A Center for Retirement Research report notes that today’s near-retirees typically spent only about one-third of their working careers participating in a 401(k) plan, which partially reflects an immature system. But even among today’s younger workers, who are in a mature system, a majority do not participate.

2. Life expectancy isn’t growing for everyone. According to a report from the Urban Institute, by 2017, non-Hispanic black men’s life expectancy was 4.5 years shorter than that of non-Hispanic white men. Among women, the gap was 2.7 years. And since about 1980, the US has seen a widening gap in life expectancies between rich and poor people. A recent National Center for Health Statistics report notes a recent decrease in life expectancy for white males attributed to “unintentional injuries, suicide, and Alzheimer’s disease.”

3. Not everyone can last long enough to claim benefits even at today’s full retirement age. Ill health drives plenty of workers not just to retire, but to retire early—thus sticking them with a lifetime reduced benefit that’s harder to live on. If the retirement age is raised, people retiring at 62 will have even less to live on’and even if the early retirement age is increased to 64 or 65 from 62, there will still be people who just can’t manage to stick it out that long. If they’re not able to claim any benefits at all till they’re older, what will they live on in the meantime?

4. Boosting incentives to claim benefits later could pay off for some. But there might be one positive: if people are encouraged by an increased incentive to wait till, say, age 75 to claim benefits, people who are able to stay in the workforce longer would probably take advantage of such an offer. According to The Urban Institute’s Richard Johnson, “People seem to take this full retirement age as kind of a signal as to when the appropriate time is to retire.” He adds that the extra years in the workforce would allow those workers time to accumulate more retirement assets, as well as helping society through continuing to pay taxes and increasing workforce productivity.

You can find the full article, including links to the reports mentioned, at BenefitsPRO.


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