Of all the ideas suggested by the chairmen of the bipartisan federal debt commission, raising the retirement age for Social Security may rank among the least popular. Polls show a majority oppose working longer to help shore up the program.
Yet the 75-year-old entitlement program is expected to go broke by 2037 after the last of the baby boomers have retired. Since one in five federal dollars goes to Social Security, most plans to rein in spending call for some combination of reduced benefits, higher taxes or delayed cashing in for retirees.
This wouldn't be the first time Congress has raised the age workers can retire with full benefits. In 2003, the retirement age began creeping up from the original 65. Today, full retirement comes at 66 and will gradually rise to 67 in 2022. Early eligibility for retirement, which brings with it reduced monthly benefits, has remained at 62.
Commission co-chairmen Alan Simpson and Erskine Bowles want to gradually raise full retirement to 69 in about 2075. They would boost early retirement to 64.
According to the nonpartisan Urban Institute, "the full retirement age would have to increase to 73 for adults to have the same expected years of remaining life in retirement today as in 1940" when Ida May Fuller became the first Social Security beneficiary. Yet between 1950 and 2008, the average age to collect benefits fell from 68.5 to 63.6.
Only workers in Norway and Iceland work longer than Americans. This isn't France, where workers recently rioted over a government plan to raise the retirement age from 60 to 62, or Greece, where some workers can call it quits with benefits at 50. Yet even in the land of the Protestant work ethic, few like the idea of putting off their golden years.
A look at the arguments for and against raising the Social Security retirement age.
Future generations. Three out of four young adults don't expect Social Security to be around when they retire. Delaying full retirement benefits until 68 for those now 50, though, would reduce the program's 75-year funding gap by 29 percent, according to estimates by Social Security actuaries, and increase the chances the children of baby boomers will get some sort of government pension.
We are living longer. In 1940, the average American lived 62.9 years. Today, life expectancy is 77.9 years. The Social Security Administration, which began when 65 really was "old age," estimates the average person today will live 21 more years in retirement.
"We simply cannot sustain a system where a typical woman born today can expect to spend as much 25 percent of their adult life, and a man as much as 14 percent, in retirement heavily subsidized by younger people," said Stuart Butler, distinguished fellow at the conservative Heritage Foundation.
We can work longer. The decline of manufacturing and the growth of the information economy has changed the nature of work for many. The share of workers employed in physical labor fell from 57 percent in 1971 to 46 percent in 2006. At the same time, more Americans adapted better eating and exercise habits that have allowed them to stay on the job longer.
If we can't work, there's a safety net. Those with back-breaking jobs or who are in ill health could be covered under a modified Social Security disability program until they reach retirement age. "We can adapt the disability system to enable workers who would be physically challenged to work until a later retirement to be provided with benefits at an earlier age," Butler said.
It would boost overall retirement income. Each extra year in the workforce offers more time to increase Social Security benefits and build up personal savings, said Andrew Biggs, a former Social Security Administration official now at the conservative American Enterprise Institute. He said an average person who delays retirement from 62 to 65 increases total retirement income by about $8,500. If everyone were required to work until at least 65, he added, poverty in old age would decline by almost 20 percent.
It would help the economy. According to a 2008 report by McKinsey & Co. cited by Heritage Foundation retirement expert David John, increasing the median retirement age by two years by 2015 would add $13 trillion to the economy over the next 30 years.
"If Americans work longer, it reduces the need for tax increases or other benefit reductions, such as to Social Security" cost-of-living adjustments, Biggs said. "Moreover, a larger labor force would boost the economy and federal tax revenues, making our other budget problems easier to solve."
Young people get screwed. Bumping the retirement age won't affect current retirees or most baby boomers, but the Congressional Budget Office calculated that delaying retirement until 70 for workers born in 1978 would reduce total lifetime benefits for today's millennial generation by about 15 percent.
It will hurt minority and low-income workers harder. Working longer is not a realistic option for everyone. "Raising the Social Security retirement age would be especially hard on lower-income and minority workers, given large and growing disparities in life expectancy and poor health and/or job prospects," said a report from the liberal Economic Policy Institute.
EPI noted that 61 percent of physically demanding jobs are held by workers in the bottom 40 percent of the wage scale. These are also the workers more likely to reap fewer, if any, years of Social Security benefits and least likely to have sizable pensions and 401(k) portfolios to supplement their Social Security checks. In fact, most seniors rely on Social Security for the majority of their income and have little to draw on if they lose their job before they come of age to retire.
Age discrimination. Older workers could face bias from employers who prefer younger employees with newer skills and smaller salaries. The current recession has seen laid-off workers in their 50s and 60s spend more time unemployed, with many worrying they may never work again or will have to take pay cuts that will diminish what they eventually collect from Social Security.
It's the wrong approach. Liberals say reducing benefits by delaying retirement isn't necessary to save the system if taxes are increased on the wealthiest.
"The right answer to the program's financing problem isn't to make people in physically demanding jobs work until they drop," wrote EPI's Ross Eisenbrey. "It's to make the rich pay a fair share of the taxes needed to fund full benefits."