RAISING THE RETIREMENT AGE
May 25, 2005
Increasing life expectancy is something we all take too much for granted. But just within the lifetime of most baby boomers, the increase has been dramatic. And projections say that life expectancy is going to continue rising, not just here but worldwide. Obviously, this will have massive effects on society that inevitably will require everyone to rethink their plans for work and retirement and necessitate changes in our institutions, says Bruce Bartlett, a senior fellow with the National Center for Policy Analysis.
In terms of retirement systems, he says, the life expectancy at age 65 is what really matters:
- In 1940, when Social Security paid its first benefits, a man that age could expect another 11.9 years and a woman would likely get 13.4 years.
- This year, a 65-year old man's life expectancy has risen to 16.2 years and a woman's is 19 years.
- According to the Organization for Economic Cooperation and Development, by 2040 every man who reaches his 65th birthday can expect to live to see his 83rd in all major countries; a woman reaching 65 years will likely live to celebrate her 86th birthday.
Unfortunately, our retirement systems are still largely based on an era when life expectancy was much lower. The nature of work and compensation has also changed so as to encourage earlier retirement than the nation can afford, says Bartlett.
Today, a majority of workers begin drawing Social Security benefits at age 62. If they waited as long as their parents, they would have to wait until age 74. Because people are drawing benefits earlier and living longer, economist Eugene Steuerle estimates that total Social Security and Medicare benefits for a typical two-earner couple have risen from $195,000 in 1960 to $710,000 today. He estimates that without reforms, this figure will rise to $1.1 million in 2030 (all in 2005 dollars).
Source: Bruce Bartlett, "Raising the Retirement Age," National Center for Policy Analysis, May 24, 2005.
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