The Deficit Dog That Didn't Bark: Raising the Retirement Age

"You're going to have to raise the retirement age for Social Security," New Jersey Gov. Chris Christie proclaimed in a recent speech to the American Enterprise Institute. "Oh, I just said it and I still am standing here. I did not vaporize into the carpet and I said it."

When the report of President Barack Obama's deficit commission emerged last year, one of its major cost-cutting suggestions was just that: an increase in the age for receiving full Social Security benefits to 69 by 2075. Yet in all of the furious deficit debate in Washington of late, the late-retirement proposal so far been a non-starter.

It was nowhere to be found in Obama's 2012 budget. It was not among the dozens of spending cuts passed by the Republican-controlled House of Representatives last week. Despite the determination on all sides to trim the cost of government, the benefits idea seems to have lost its allure, at least for now.

Any proposed change to federal entitlement programs is bound to be politically fraught, but as Christie suggested, this one is especially thorny.

Though the actual impact of raising the retirement bar would not be felt for decades, the idea plays badly with older Americans. Even under current Social Security arrangements, millions of people already receiving benefits are in a financial bind:

• More than a third of all men 65 and older rely on Social Security for at least 80 percent of their income, a rise of almost 50 percent in the past decade.
• More than half of all women 65 and older have the same reliance, an increase of 26 percent in a decade.
• The bankruptcy rate for people 65 and older has doubled over the past two decades, and it's quadrupled for those 75 and older.
• The unemployment rate among workers 65 and older has more than doubled in the last two years.
• The government predicts a sharp rise in foreclosures among the millions of older people who have taken out reverse mortgages to make ends meet.

Raising the retirement age has little appeal for another age group as well, those from 55 to 62 who are closing in on their so-called "golden years." Over the past two decades, more and more of them have remained in the work force after age 62, when they became eligible for early Social Security benefits.

A major factor in that decision was a widespread change in company retirement plans that placed more responsibility for employees' financial future on their own backs. Workers stayed on the job in order to build up their 401(k) retirement accounts, a trend that only strengthened as the recession took a bite out of both retirement savings and home values.

The age for receiving full retirement benefits is already on the way up. It is 66 for people born in 1943 to 1954 and reaches 67 for those born in 1960 or later.

Those changes make sense to Alicia H. Munnell, director of the Center for Retirement Research at Boston College. "People are generally healthier and living longer," she told AOL News, "so encouraging them to keep working longer is a constructive move. What you don't want to do is make abrupt changes in the retirement age that won't give younger people enough time to adjust their savings plans."

One of the problems with raising the full benefits age, Munnell acknowledged, is the failure of many corporations to recognize that 65 ceased being the magic retirement number once employees were shifted from a 65-and-out pension arrangement to the it's-up-to-you 401(k) model. Munnell sees that adjustment happening -- more retirement-age people have remained in the work force -- but too slowly. "By law, you can't fire people because of their age," she said, "but you can make them feel uncomfortable enough to make them leave."

For those who lose their regular jobs at or before age 65, increasing the age for receiving full benefits can be a serious hardship. Finding comparable work is next to impossible; finding any kind of work these days is difficult. And many older people cannot work because they have a sick spouse to care for or are sick themselves.

Yes, the unemployed and the ailing can sign up for Social Security benefits at age 62, but their monthly payments will be considerably less than if they waited until 65. For every year you retire before the full retirement age, you lose about 7 percent of your benefits.

If you rely on Social Security benefits for more than 80 percent of your income, that difference can make all the difference.