Should We Raise the Retirement Age?
by Maggie Mahar
“On the spending side, we could and should consider a higher retirement age, or one pegged to lifespan; more progressive Social Security and Medicare benefits; and a stronger safety net for the Americans who need it most. “On the face of it, lifting the retirement age makes sense. Americans are living longer, so they could retire later and still enjoy their golden years.
Except—only some of us are living longer.
A white female born today can expect to live 80.6 years. By contrast an African-American male born today can expect to live to be 69.7. Lift the retirement age, and he can look forward to perhaps two or three golden years—after contributing to Social Security his entire working life. Lift the age when he becomes eligible for Medicare, and he’ll probably be suffering the final stage of a chronic disease before he qualifies.
If you look at older Americans, the gap in life expectancy narrows. An African –American male who make it to 55, has a higher chance of living past 67. By surviving to 55, he has dodged many bullets .(If he lives in an unsafe neighborhood, this may be literally true.) But even later in life, a substantial difference persists. For example, the death rate from age 62 to age 65 for African-American men is over one and one-half times that of white men (8.9 percent versus 5.5 percent).
But race is only one factor that determines life expectancy. Occupation also is key. Some jobs are physically grueling. By age 65, the body is wearing out.
As David A. Smith, Director, Public Policy Department, American Federation of Labor and Congress of Industrial Organizations (AFL–CIO) testified before a 1998 hearing on the Future of Social Security before the House Ways and Means SubComitte on Social Security “it is clear that people who spend their work lives scrubbing floors in a nursing home, moving 5 liter engine blocks around a factory floor, pouring steel into a Bessemer mill, or hauling bricks around a construction site can count on a shorter life span and a shorter work life. They are more likely to experience work place injuries and to lack the continued physical endurance necessary to perform their jobs very far into their 60’s. We should not be telling them that they have to postpone retirement or make do with less.”
Yet this is exactly what we would be doing if we lift the retirement age.
Even though, these workers, just like a well-educated office worker, have contributed the same percentage of their income to Social Security and Medicare for 45 years, or more.
We also know that the poor die sooner. Poverty is stressful. And low-income families often have few safe places to exercise, and little access to nutritious foods. (Grocery stores in ghetto neighborhoods often don’t carry fresh fish, fruit and vegetables; if these perishable products are available, they are very expensive.) On average, wealthy Americans live 8 years longer than the poor. Middle-class Americans live longer, but not as long as affluent Americans.
So when policy-makers say “we” are living well past 65, most often they are referring to themselves and people in their social circle. Journalists repeat the argument—again thinking of the people they know.
I am not totally opposed to lifting the age when Americans become eligible for Social Security---though this not the time to do it. We are in the middle of a recession. As I explain here, squeezing our most popular social programs is not the way to lift consumer confidence, or strengthen the economy.
But in the future, if we decide to raise the retirement age, we should take life expectancy into account. Both workers in physically demanding occupations, and low-income workers should be able to retire earlier. Some adjustment should be made for workers coming from racial or ethnic backgrounds with a shorter life expectancy. In other words, I’m suggesting that retirement age should be “indexed” to life expectancy.
Would well-educated, more affluent Americans object if they had to wait until they were 68 –or even 70—to collect Social Security while others began collecting, as they do today, sometime between 62 and 66?
Begin with how we pay for Social Security. Today Social Security taxes are levied on the first $106,800 of income. Any earnings above that amount are not taxed.
Some would say that Americans earning over $106,800 should be taxed on more of their income. But under the healthcare reform legislation that the president just signed, Congress hiked Medicare payroll taxes for individuals earning over $200,000 (over $250,000 for couples filing jointly.) This is not the time to lift Social Security tax as well. In fact, there is no need to rush to raise Social Security taxes this year or next. As I explain here, we have plenty of time to make the small fixes needed to make the program solvent over the long term.
Down the road, we may want to boost tax, but we won’t need a huge tax hike. Some observers have suggested we begin taxing income over, say, $200,000, leaving earnings between 106,800 and $200,000 untouched.
Others policy pundits suggest cutting benefits for wealthier seniors. This, I think, would be a terrible mistake. First, everyone has a different definition of “wealthier”. Some fiscal conservatives would cut benefits for seniors earning more than $50,000 or $60,000. Depending on where they live, whether they own their home outright or are still paying rent or a mortgage, and how much they must lay out for medications and medical care, some seniors in this bracket are quite comfortable, but others are not. Relatively few consider themselves “wealthy.” And all have been paying Social Security taxes throughout their working lives..
Cutting their benefits would mean undermining the solid support that Social Security has enjoyed for decades. It is not a program for the poor; it is not a program for the middle-class; it is a retirement program for all Americans. If we begin trimming benefits for the affluent, at some point “the haves” will begin to view Social Security as an “entitlement program” for “people who didn’t bother to save.” More affluent Americans will begin to resent the Social Security taxes they pay. They will lobby Congress to reduce Social Security benefits and taxes across the board. Social Security will no longer be safe.
Medicare also enjoys a solid base of support, in part because it is a program for everyone. We do need to reduce Medicare spending, but rather than using a “means test” to cap benefits for any particular group of Americans, we should target the waste in the system. As I have written in the past, years of research reveal that roughly one-third of our Medicare dollars are squandered on unnecessary or ineffective treatments, redundant tests, extended hospital stays caused by medical mistakes that, in some cases, lead to additional surgery, and over-priced drugs and devices that, too often, are no better than the older, less expensive products that they replace.
The reform legislation gives the Centers for Medicare and Medicaid the power to begin to change how we pay for care—providing bonuses for safer, higher quality care. Today, when we pay providers fee-for-service, we are rewarding volume, and often that means that we are rewarding inefficiency. If the rate of complications following surgery, medical errors, hospital-acquired infections and readmissions is higher at Hospital A than at Hospital B, Medicare winds up paying Hospital A more. Medicare reform will change the financial incentives so that providers are rewarded, not for “doing more”, but for “doing it right”. That means offering “the right care to the right patient at the right time.” Not surprisingly, more efficient care also tends to be less costly. If we put more emphasis on primary care, which is what the reform legislation does, fewer patients will need acute care. This is how we can cut Medicare spending, without reducing benefits for anyone.
If you look at older Americans, the gap in life expectancy narrows. An African –American male who make it to 55, has a higher chance of living past 67. By surviving to 55, he has dodged many bullets .(If he lives in an unsafe neighborhood, this may be literally true.) But even later in life, a substantial difference persists. For example, the death rate from age 62 to age 65 for African-American men is over one and one-half times that of white men (8.9 percent versus 5.5 percent).
But race is only one factor that determines life expectancy. Occupation also is key. Some jobs are physically grueling. By age 65, the body is wearing out.
As David A. Smith, Director, Public Policy Department, American Federation of Labor and Congress of Industrial Organizations (AFL–CIO) testified before a 1998 hearing on the Future of Social Security before the House Ways and Means SubComitte on Social Security “it is clear that people who spend their work lives scrubbing floors in a nursing home, moving 5 liter engine blocks around a factory floor, pouring steel into a Bessemer mill, or hauling bricks around a construction site can count on a shorter life span and a shorter work life. They are more likely to experience work place injuries and to lack the continued physical endurance necessary to perform their jobs very far into their 60’s. We should not be telling them that they have to postpone retirement or make do with less.”
Yet this is exactly what we would be doing if we lift the retirement age.
Even though, these workers, just like a well-educated office worker, have contributed the same percentage of their income to Social Security and Medicare for 45 years, or more.
We also know that the poor die sooner. Poverty is stressful. And low-income families often have few safe places to exercise, and little access to nutritious foods. (Grocery stores in ghetto neighborhoods often don’t carry fresh fish, fruit and vegetables; if these perishable products are available, they are very expensive.) On average, wealthy Americans live 8 years longer than the poor. Middle-class Americans live longer, but not as long as affluent Americans.
So when policy-makers say “we” are living well past 65, most often they are referring to themselves and people in their social circle. Journalists repeat the argument—again thinking of the people they know.
I am not totally opposed to lifting the age when Americans become eligible for Social Security---though this not the time to do it. We are in the middle of a recession. As I explain here, squeezing our most popular social programs is not the way to lift consumer confidence, or strengthen the economy.
But in the future, if we decide to raise the retirement age, we should take life expectancy into account. Both workers in physically demanding occupations, and low-income workers should be able to retire earlier. Some adjustment should be made for workers coming from racial or ethnic backgrounds with a shorter life expectancy. In other words, I’m suggesting that retirement age should be “indexed” to life expectancy.
Would well-educated, more affluent Americans object if they had to wait until they were 68 –or even 70—to collect Social Security while others began collecting, as they do today, sometime between 62 and 66?
Probably some would. On the other hand, many of us will continue working until we are 68 or 70 anyway. Those of us who are lucky enough to have jobs that we love will go on working as long as we can. And I would have a very hard time begrudging someone who spent his or her life cleaning offices, working in a coal mine, or scrambling to support a family on $25,000 a year, if they began collecting Social Security before I did.
Making Medicare and Social Security More “Progressive”
When Hoyer speaks of making these programs more progressive he is suggesting either than wealthier people should pay more to support these programs, or that benefits should be “means-tested” with people of greater means receiving fewer benefits on the grounds that they don’t need public money.
Begin with how we pay for Social Security. Today Social Security taxes are levied on the first $106,800 of income. Any earnings above that amount are not taxed.
Some would say that Americans earning over $106,800 should be taxed on more of their income. But under the healthcare reform legislation that the president just signed, Congress hiked Medicare payroll taxes for individuals earning over $200,000 (over $250,000 for couples filing jointly.) This is not the time to lift Social Security tax as well. In fact, there is no need to rush to raise Social Security taxes this year or next. As I explain here, we have plenty of time to make the small fixes needed to make the program solvent over the long term.
Down the road, we may want to boost tax, but we won’t need a huge tax hike. Some observers have suggested we begin taxing income over, say, $200,000, leaving earnings between 106,800 and $200,000 untouched.
Others policy pundits suggest cutting benefits for wealthier seniors. This, I think, would be a terrible mistake. First, everyone has a different definition of “wealthier”. Some fiscal conservatives would cut benefits for seniors earning more than $50,000 or $60,000. Depending on where they live, whether they own their home outright or are still paying rent or a mortgage, and how much they must lay out for medications and medical care, some seniors in this bracket are quite comfortable, but others are not. Relatively few consider themselves “wealthy.” And all have been paying Social Security taxes throughout their working lives..
Cutting their benefits would mean undermining the solid support that Social Security has enjoyed for decades. It is not a program for the poor; it is not a program for the middle-class; it is a retirement program for all Americans. If we begin trimming benefits for the affluent, at some point “the haves” will begin to view Social Security as an “entitlement program” for “people who didn’t bother to save.” More affluent Americans will begin to resent the Social Security taxes they pay. They will lobby Congress to reduce Social Security benefits and taxes across the board. Social Security will no longer be safe.
Medicare also enjoys a solid base of support, in part because it is a program for everyone. We do need to reduce Medicare spending, but rather than using a “means test” to cap benefits for any particular group of Americans, we should target the waste in the system. As I have written in the past, years of research reveal that roughly one-third of our Medicare dollars are squandered on unnecessary or ineffective treatments, redundant tests, extended hospital stays caused by medical mistakes that, in some cases, lead to additional surgery, and over-priced drugs and devices that, too often, are no better than the older, less expensive products that they replace.
The reform legislation gives the Centers for Medicare and Medicaid the power to begin to change how we pay for care—providing bonuses for safer, higher quality care. Today, when we pay providers fee-for-service, we are rewarding volume, and often that means that we are rewarding inefficiency. If the rate of complications following surgery, medical errors, hospital-acquired infections and readmissions is higher at Hospital A than at Hospital B, Medicare winds up paying Hospital A more. Medicare reform will change the financial incentives so that providers are rewarded, not for “doing more”, but for “doing it right”. That means offering “the right care to the right patient at the right time.” Not surprisingly, more efficient care also tends to be less costly. If we put more emphasis on primary care, which is what the reform legislation does, fewer patients will need acute care. This is how we can cut Medicare spending, without reducing benefits for anyone.
This is reverse discrimination at its finest. this is the worst idea I have EVER heard, and I am a minority!
Posted by: barb | July 01, 2010 at 05:36 PM
The best solution over time is to allow everyone who works to keep the bulk of their earnings rather than have it confiscated by government. If one is told from the beginning that they are responsible for their own life, allowed to keep what they earn, and educated about basic finance, then the great majority will provide for themselves.
Implicit in your argument is the assumption that most of us are inept at running our own life. I resent that assumption as do most people. Get ever-expanding government programs and bureaucrats out of the way and most of us will be just fine. For those who are truly in need there is charity.
Posted by: fr | July 02, 2010 at 12:26 PM
Social Security was started in the 1930's, when the average life span was under 70. No one got it for long and many people (mostly blue collar) did not live to get to it. It's purpose was not "enjoy your golden years" it was "here is something to live on now that you are not capable of working". Retirement age has not been raised since inception, over 70 years ago. It should be raised for everyone and if some people do not get it, that helps make the program work for the people living beyond their working lifetime.
Posted by: Andy | July 06, 2010 at 04:27 PM
The last change to social security actually did raise the retirement age. It was a gradual increase based on year of birth, and the increased full retirment age didn't happen immediately. Frankly I think it can be done again in much the same way. Think long term folks.
Posted by: jc | July 13, 2010 at 03:03 PM
Social Security was never ment to be a "retirement program" for people. It started out to be supplemental income (in addition to other forms of retirement savings) for those who put money into it.
Posted by: Judith A Emert | August 17, 2010 at 03:36 PM