Back to Bismarck!
Today I am officially old (by definition of the U.S. Census Bureau).
As an economist, I am “hung up” on this age. Why? Because the life-cycle theories of utility maximization that describe patterns of consumption are based on a retirement age; and 65 was enshrined as that age by the Social Security Act of 1935 (even though its predecessor, Bismarck’s legislation of 1889, set the pension age at 70).
The problem that has underlain Social Security and other countries’ public-pension programs is that the time from 65 to death has been rising very rapidly — five years for men, seven for women since 1938 in the U.S. — so that Social Security has been increasingly underfunded.
The U.S. has gone a bit of the way. Sixty-six is about to be the regular age for Social Security, and 67 will be in 2021.
But that is nowhere near enough, given rises in longevity. The solution is simple: raise the age of regular benefits by a year four separate times — once every five years from 2015 until 2030. That removes most of the Social Security deficit; and the average retiree could still expect to live at least as long — and draw benefits for at least as long — as Americans who retired at 65 when the program began.