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Downside of a higher retirement age

Life spans have increased, but some say raising the Social Security retirement age is not fair for all seniors.

By MSN Money Partner Nov 13, 2012 6:04PM

This post comes from Philip Moeller at partner site U.S. News & World Report.


U.S. News & World Report logoNow that the post-election entitlements fights are back in the spotlight, raising the Social Security retirement age will return to center stage as one of the common prescriptions for closing the program's long-term funding gap.


Image: Social Security Card (© Scott Speakes/Corbis)Increasing or entirely lifting the ceiling on taxable wages -- set at $113,700 in 2013 -- is another frequently mentioned proposal. Further down on the list are measures to change the annual cost-of-living adjustment for Social Security recipients and restrict payments to high-income beneficiaries, as well as a slew of benefit tweaks that could have a meaningful cumulative impact on program finances.


Unlike the government's other big safety net programs -- Medicare and Medicaid -- Social Security is not facing imminent funding problems. With no changes at all, the program projects that it will pay all benefits for more than 20 years and would then be able to continue paying out roughly three-quarters of benefits.


Another misconception about Social Security is that it is floating in red ink. Actually, the program had a surplus of about $2.7 trillion in 2012. This cushion will grow further before being sapped by rising benefit payments triggered by millions of retiring baby boomers.


At first glance, raising the retirement age seems like a straightforward change that simply recognizes the demographic realities of aging. People are living longer than ever and are physically able to continue working into their 60s and even 70s. The economy will need more older workers because retiring boomers are being followed by a much smaller generation of workers.


Lastly, people will need to keep working more years for financial reasons -- to recover from the recession and to fund retirements that will last a long time.


Social Security is one of the ways they will boost retirement earnings, of course. Most people earn more money later in their working lives than when they were younger. So adding several years to people's Social Security earnings history is likely to boost their Social Security benefits when they do retire.


So what's not to like? According to a phalanx of liberal seniors groups -- foundations, think tanks, women's groups and other Social Security "preservationists" -- the longevity rationale for raising the retirement age doesn't apply to lower-income and less-educated men and, especially, women. They would get hammered by raising the retirement age. And they are precisely the group of Americans -- and a pretty big group at that -- that depends desperately on Social Security benefits for the bulk of their retirement incomes.

Here's the preservationist logic against raising the retirement age:


1. Social Security benefits are pegged so that a person reaching what the agency calls its "full retirement age" (FRA) is entitled to his or her full benefit. People retiring at the earliest age, which is now 62, get about 75% as much money each month from Social Security as if they had waited until their FRA -- 66 for those now approaching retirement.


It's also possible to defer taking Social Security until age 70, when the monthly benefit would be about 132% of what it is at age 66. This benefit structure was designed to be dollar-neutral to Social Security. Looking at longevity data and past decisions of beneficiaries, the agency figured that it will pay out the same amount of money regardless of when people elect to begin receiving benefits.


Raising the retirement age from 66 to 70 means that the time gap between early retirement at 62 and full retirement would be increased from four to eight years. This assumes it would still be possible to take early retirement at age 62. If the agency keeps its benefit structure in place, it no longer could afford to pay people 75% of their FRA benefit if they elected to begin receiving the benefit at age 62. Instead, that "value neutral" payment at age 62 would fall to about 57% of the full benefit.


2. In theory, longevity gains mean that if the FRA was raised to 70, early retirement might begin at age 66 and not 62. Raising the retirement age would thus shift everyone by four years. The system would save money by having to pay benefits for four fewer years. But individuals would not be so bad off, because they'd have worked for an extra four years and presumably boosted their retirement incomes during that period of extra work.


But while such longer lives are truly wonderful, they unfortunately are not being enjoyed by lower-income, less-educated people who work in physically taxing jobs. They're not living longer.

Wealthier and better-educated people, on balance, follow healthier lifestyles, seek out medical care and follow their doctors' advice in taking medications and related therapies for health problems.


3. Lower-income people often are not able to extend their working lives another four years. Many work in physically demanding jobs, and their bodies have worn out by the time they enter their 60s. People who retire at age 62 today tend to work in these low-income, physically demanding jobs. For them, early retirement is not a luxury but a forced necessity.


4. Raising the retirement age will thus sharply cut benefits of people who are still forced to seek early retirement. And these folks often have little set aside in the way of a retirement nest egg. Social Security benefits thus represent a very large percentage of their retirement incomes. Cutting those benefits, preservationists argue, is thus punitive as well as heartless.


More on U.S. News & World Report and MSN Money:

Nov 15, 2012 9:55AM
If you are going to depend on social security for your retirement, you are in for a world of hurt. It is not going to be enough. Social security was never designed to provide for one's retirement. It is designed to be a safety net to keep older folks out of poverty. Remember the life expectancy when social security was enacted was only 61.2 years. If you are a younger worker and want to live out your "Golden Years" comfortably start saving as much as you can for your retirement and don't depend on the government. 
Nov 15, 2012 9:55AM

"Another misconception about Social Security is that it is floating in red ink. Actually, the program had a surplus of about $2.7 trillion in 2012."


The surplus was spent starting in the Reagan Administration and continuing until it was generally exhausted during our current depression.  Money that was spent as part of general revenue cannot be surplus.  This is just another of the many articles that stupidly causes Americans to believe that the $2.7 trillion exists somewhere so that it can be accessed to pay Social Security benefits.


I repeat, the $2.7 trillion is gone.  It was spent as general revenue.  There is no real Social Security Trust Fund and there most definitely is no surplus.

Nov 15, 2012 9:51AM
physically able to work in your 60's and into your 70's? try working a physically demanding job for decades and then come back and write this article. who writes this garbage?
Nov 15, 2012 9:38AM
we have to support the corrupt politicians and poor

Nov 15, 2012 9:37AM
If they raise the age you have to reach before getting social security, the government by God, had better tell the employers they HAVE TO consider us first as employment applicants before they consider younger employees.  If I were the President, I would make it an executive order that employers MUST hire people over the age of 50, and yes, this IS affirmative action for seniors.  I know how much you conservatives hate any kind of affirmative action, but a lot of people over the age of 50 have been ignored by employers even though it is our age group that has the experience and work ethic.  If they continue to put our applications in the round file, they are putting senior citizens out on the streets to fend for themselves, and that will be literally murder. Yet, I can hear the conservative posters now.  They will say that it is OK to put seniors out on the streets to fend tor themselves, adding, how else would you kill off people not considered "useful" by the conservative posters.  I know you conservatives think that way even though you hate the concept of evolution, and with it, Charles Darwin. Yet, you think it is OK to force people who have worked all their lives to have to fight for their lives trying to stay warm in winter weather with no shelter to go to, and no food available.  I am sure the employers who think it is OK to throw away the applications of older applicants because it is the only way to kill off those whom they consider "useless," so they can hire the young applicants who know nothing about their rights in the workplace.  I know this is the kind of thoughts and ideas that go through the heads of employers and just conservative posters who think that any application of survival of the fittest is perfectly fine no matter how inhumane.  After all, being nice, considerate, and open-minded is considered a "weakness" to conservatives because being nice, compassionate, and empathetic are "appleasement behaviors," and therefore the actions of the weak according to the conservatives.  Back to affirmative action for older job applicants if the age to receive social security goes up:  It is an absolute necessity unless the powers that be want to be responsible for a lot of deaths of those of us who are really the best, most experienced workers.  Allowing employers to continue to discriminate against older workers after raising the age a person can receive their earned benefits is the same thing as eugenics.  Hitler would be very proud of you.
Just another way to make the middle class pay for republican boondoggles that have sunk America into debt, without making rich republicans kick in their fair share. 
Nov 15, 2012 9:29AM
I was an Auto Worker for 35 yrs.  I retired at 62.  I am 69 yrs old now and if the retirement age would have been 70 I can guarantee that I would have never made it.  Both of my knees hurt and I've had surgery on both shoulders also had quadruple by pass surgery 3 yrs ago.  I possibly could have made it to 65 but would have probably been on disability  after that. Either way I would be considered one of the takers, one of the 47% on the take as Romney put it.  Social Security has worked for 77 years  it is a good program and is not broken as the republicans would like us to believe . We pay into SS our employers pay into SS it's not even correct to call it an entitlement . It is not a free handout  like the politicians want us to believe.

Nov 15, 2012 9:05AM
Nov 15, 2012 8:56AM
If you polish a chair with your butt and shuffle paper for a living the retirement age don't matter to much. If you work out in the weather and perform manual labor, retirement can't come soon enough. The body wears out.
Nov 15, 2012 8:52AM

lower income people who do hard jobs will simply go on disability.  Its not nearly as hard as it once was.  They will make more on disability than they would have made on SS anyway.  No one cried when the current age increase was put in action. 


People should collect at 65 only if they promise to die by 72.  The SS actuarial tables used to set up the system are no longer valad when the facts of longer age no longer apply. 


 Lets use war on women, class warfare and anything else that puts VOTERS on the public teat.  It is time to put the House and senate on SS and Obamacare.  We pay for their benefits.  Why should these benefits be better than ours.  They done even work all year.  Some would say they hardly work at all.  Their hardest job is 1: being taken out to dinner by influence pedderers. 2: going on paid fact finding vacations to foreign countries. 3: Playing golf with corporate ceos

Nov 15, 2012 8:41AM
People are living longer and are currently paying in less to SS so if something is not done then the system will become insolvent, SS was only designed to be a supplemental insurance and not the primary income of retirement as so many have made it into, I see people complaining about the money borrowed from the SS trust fund claiming that the Govt't stole their money, Simple facts are that any money put into an account that does not generate interest like the old SS trust fund is like putting money in a piggy bank and expecting there to be more money in there than you actually put in,A person who elects to start recieving early reduced SS benefits at age 62 will deplete all that they have paid in within the first 10-12 years, Meaning that once the reach age 72-74 they will be using someone elses money, Those who opt to wait for the increased benefits (ages 65-67) or full benefits(age 70) who deplete what the have paid in even sooner generally within 8-10 years, This does not even take into consideration those who have only worked the minimum required years and are recieving SSDI. I know everyone thinks that they have paid in a lot to SS but in reality they have not and generally take much more out than they have paid in.
Nov 15, 2012 8:35AM
My retirement plan: Work until I fall dead at my desk, get buried.
Nov 15, 2012 7:59AM
I think the age you are able to retire should depend on your type of work. If you sit behind a desk in the air conditioner you should easily be able to work into your 70"s. If you have a labor intensive job, such as welder roofer, construction worked, etc you should be able to retire at 62-65. If you force these people with hard labor jobs to work until they are 70, they will be not only a danger to them selves , but others on their job. I personally can"t see a 69 year old hanging off the side of a ship welding in 105 degree heat index weather, or brutal summers in the south with a roofer  69 years old climbing up and down a ladder carring packs of shingles on their back. The people who want to raise the retirement age are the ones sitting in air conditioner who have never done a hard days work in their life.  Perhaps we should the right to not have any sociial security take out of our checks and save our own money for our own retirement. That would elminate all this discussion on what age one is forced to retire. 
Nov 15, 2012 7:29AM
Since we are part of the USA American population that has every outlet of legal crapola installed by crooks we call government. One simple solution to the whole problem. If you are a hands on "building something other than a paper pile"'s called disability. Play the game like our government and corporations does. Instead of bitching about our so-called government 62, become disabled. The pay is better and health bennys are alot better. If you are a hands on working know what I mean. We have been promised since birth that SS will be there and now our so-called government stolen our retirement to fund wars and themselves. Every perk known to mankind has been given to our so-called government. So play the game and go for the most bang for the buck.
Nov 15, 2012 6:19AM

100% TRUE! People who worked physically demanding jobs will never achieve the same lifespan as the Look Busy Feel Easy types. I retired because the physical demands of my job plus my Health Condition did not permit me to work any further. If I continued to work any longer it would be wishing Good Bye to my chances of seeing my grandchildren, leave alone watching them grow up. I have no idea why the government keeps ignoring the INCONVENIENT TRUTH. You might as well call Dr Kourvokian on me. That is pull the plug on me. I guess I am ranting. Call it whatever you like or do the decent thing FACE THE INCONVENIENT TRUTH!!! We are not asking for a handout. We are not BEGGARS, as the HEARTLESS REPUBLICANS would have you believe. We are demanding our rights after paying into the Social Security System all our working lives. To clarify, Social Security and Medicare are not Doles. I leave it to you Wise , Know it all guys to decide the difference between Welfare and Medicaid and the former. The former is a Solemn Promise made by the Government to the people. KEEP IT!!! We are not DOORMATS to be used but left out in the Cold.

Nov 15, 2012 3:05AM
Brilliant.  No matter the BIG problem w ith age discrimination as it is. If they dont hire (and can't ask your "age" but still can aske "are you uner 40" on the job apps"...)  the over 40's.can you imagine..they will ..hire a 65 year old?  There..another way to "take YOUR money/remove it from you after paying in all those years'.  And hope you die before you can collect. (With no retirement, no hire for a public assisstance (that is only for drug addicts/alcoholics, brainless baby producing factories, and illegal aliens).  You..will get the sidewalk, no money. No will die and they will get to keep all your money.  
Nov 15, 2012 2:51AM

There's another problem-what happens to people, mostly women, who find themselves at 60 with elderly parents needing care, who can't afford to hire help, or to do without some income while they care for their parents?


It is high time that families got more priority. Women are carrying huge loads because govt in this country (read men), thinks they should do it all with nothing to say about it. They work because they want to, or usually, have to, care for children and parents, with good day care difficult and expensive, and caregiver help tough to come by. The system is rigged to favor nursing homes, which is not cost efficient.


All this is less socialism than common sense.


Freedom is having choices and opportunities. We can always admire those who succeed in overcoming huge obstacles, without thinking that is the way it should be. The more opportunity is available, the greater the potential for each person to succeed. Few will overcome huge obstacles. Removing as many of those obstacles as possible allows us maximum opportunity for growth. There is no shame for anyone in succeeding with a leg up from his fellows.


I always find it amusing that the rich are the guys who keep telling us it's good for us to struggle-especially from the likes of Romney, born with a silver foot in his mouth.



Nov 15, 2012 2:34AM

There are issues with further raising retirement ages. One issue is that while many of us live longer, we also end up with chronic conditions that can make holding down a job difficult, if not impossible. SS Disability should cover this, but these days, you can't collect without getting a lawyer and a huge hassle. Many can't go there. What happens to folks who work very physical jobs? That can get very difficult by the 60's. What happens to folks in bad times like these? No one is going to hire people in their 60's when the market is flooded with younger people. How do they live until they can collect full retirement? Drain the 401K? Fine, if you have one. What we need is a bridge for older, less employable people until they can retire. With that proviso-that the sick and those suffering from long term unemployment through no fault of their own can be covered, raising the retirement age is not a bad idea. Covering the above is likely to kill any benefit, and it might even cost more.


Lifting the income cap, and the benefits cap to some degree would help. A small increase in SS premiums to help cover the bridge for the infirm and employment challenged is also called for.


Ageism is a real problem in the US. Either it has to be stopped, or provision must be made for those affected.


Nov 15, 2012 2:32AM

Why should anyone have to wait longer for retirement, since we are the ones that paid into it.  Everyones health, finacial and working situation is different.

We get approximately 75% of full retirement if we take it at 62. After 62, it increases approximately 8% a year until maximum retirement. We should also be able to take an additional reduction of 8% at 61 and additional reduction of another 8% at 60, if we wanted. We may be in poor health and need the supplement earlier.

It seems that things should be getting better; not worse, if Social Security funds were managed completely as intended. People should be able to retire earlier and open up jobs to people who really need a job. In the not too distant future, unemployment should greatly reduce with the large group of baby boomers now reaching retirement age, IF we don't start rasing the retirement age...especially now.

Nov 15, 2012 2:27AM
They want you to die so they don't have to pay you let's make them work till they are 75 and the rest of us will retire when we dam well want to. Our they can put  back the money they ripped off and problem solved. who ever took all that money should be in jail........ 
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