I Turn Old Today

INSERT DESCRIPTIONDan and his wife in 1966.

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.

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 37

View All Comments »
  1. Garbanzo says:

    Being 41, I’d go for that. You could raise it by six months every two years over a few decades.

    Thumb up 0 Thumb down 0
  2. Elizabeth says:

    Does this fix you mention take into account only increased longevity or will it also take into account the vast number of baby boomers getting to retirement age and the sparse number of people under retirement age to pay for it?

    Just curious because it seems like such a simple fix for what has seemed like a monolithic and unsolvable problem.

    Thumb up 0 Thumb down 0
  3. Matt says:

    This is a bad idea. As a society we work harder and raise the standard of living and life expectancy and the result is… working more? Why shouldn’t we get a longer retirement? I deserve it. I have lived in moderation, and have taken care of my health, a longer retirement only seems fair.

    Wouldn’t reducing health care spending also fix social security?

    – MORE IMPORTAINTLY

    There are some ethnic groups that life expectancy barely reaches the retirement age. Yes, Anglo-Americans are having long retirements. But some Americans are lucky to get a single Social Security check.

    Thumb up 0 Thumb down 0
  4. Scott W says:

    Happy birthday, Daniel! At 65 you still look great.

    Thumb up 0 Thumb down 0
  5. Tom says:

    Much more sensible is to allow people to start Social Security when then choose (with perhaps a minimum of 55), and grant them a monthly rate based a fixed sum and the average life expectency. People who can work then have an incentive to delay taking social security (their monthly benefits will grow), while those who can’t can take it when they need it. Assigning a single starting age for everyone will be too early for some, too late for others. One size does not fit all.

    Thumb up 0 Thumb down 0
  6. jb says:

    #3 – the problem is that the system isn’t designed to support the number of people living as long as we are.

    If you feel that you deserve a longer retirement, you can always pay for your own retirement from your own savings for the first few years before SS kicks in.

    As far as I know, SS pays a pittance anyways – you really don’t want to count on Social Security as your primary income source in your golden years.

    Thumb up 0 Thumb down 0
  7. martin Henner says:

    Longevity is only one factor.

    Daniel appears to think only about white collar workers like himself, who can continue to work after age 65 without ill effects.

    That may not be true for miners, longshoremen, and other workers doing heavy labor, especially heavy lifting. When they get past 60, their backs and knees and other body parts begin to deteriorate, and it may not be reasonable to expect them to continue.

    Thumb up 0 Thumb down 0
  8. Bruce G says:

    Why shouldn’t we get a longer retirement? I deserve it.

    You’d think longer life expectancy would be reward enough.

    Since I don’t reach retirement age for at least another 25 years, I used to say that I’d be lucky to get *any* Social Security. But with the latest economic turmoil, I’m beginning to wonder if I’ll even get to retire period. So no whining by current retirees or soon-to-retire baby boomers, please.

    Thumb up 0 Thumb down 0