Tags: Social Security | retirement | age | money

LAT: Lower-Income People Suffer Most From Raising Retirement Age

LAT: Lower-Income People Suffer Most From Raising Retirement Age
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By    |   Monday, 18 April 2016 07:54 PM

Saving the Social Security system from possible insolvency can be done with an unpopular mix of benefit cuts, tax hikes and raising the age of eligibility for monthly payments.

Fiddling with that age requirement isn’t fair to the people who rely on the government-run program the most: Poor people who don’t live very long, according to reporter Michael Hiltzik at the Los Angeles Times.

“The basic problem with raising the retirement age for Americans is that all Americans are not alike,” he writes. “The differences in life expectancy are closely tied to economic status, education and race.”

The original Social Security Act of 1935 set the minimum age for receiving full retirement benefits at 65, back when the average life expectancy in the U.S. was about 58 for men and 62 for women. Currently, the full benefit age is 66 for people born in 1943-1954, and it will gradually rise to 67 for those born in 1960 or later, according to the Social Security Administration.

Life expectancy has increased, especially for wealthier Americans, and the less affluent would be disproportionately hurt by raising the eligibility age for retirement payments, Hiltzik writes.

“For men born in 1960 and therefore turning 56 this year — the chances of living to 85 after reaching 50 had risen to 66 percent for those in the top 20 percent of income, while for those at the bottom, the probability had barely budged,” according to the LAT, citing data from the National Academy of Sciences. “More disturbingly, the life expectancy of some Americans, especially women in the bottom 40 percent of household income, has been noticeably shrinking.”

Higher levels of smoking and obesity that result from limited access to healthcare may also affect longevity, Hiltzik writes.

“Through its benefit structure, which provides lower-income workers with a higher benefit proportional to their earnings than it gives higher-income workers, Social Security redistributes wealth from rich to poor. That's fairly well understood,” Hiltzik writes.

“What's less well understood is that it also redistributes from those who die young to those who die older, since the latter collect benefits for a longer period.”

Longer lifespans also mean many people will find new ways to spend their golden years, including getting a job.

“If you retire at 63 and live to 85, you will have been retired for a quarter of your life. Should you live to 95 instead, you will have been retired for a third of your life. On average, that cannot work financially,” writes Alex Pollock, a senior fellow at the R Street Institute in Washington, in a RealClearMarkets blog.

Retirement income will be squeezed as traditional sources of funds, including pensions and Social Security, cut their payouts or risk insolvency. A Citigroup study estimates $18 trillion has been promised to people but won’t be there when they’re ready to leave the work force, according to Pollock.

“There are only two answers: Put more money in the piggy bank while you are working -- and as retirements grow longer, this means a lot more,” he says “Or make the retired years fewer by working longer. Or both.”

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Saving the Social Security system from possible insolvency can be done with an unpopular mix of benefit cuts, tax hikes and raising the age of eligibility for monthly payments.
Social Security, retirement, age, money
521
2016-54-18
Monday, 18 April 2016 07:54 PM
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