NCPA - National Center for Policy Analysis

Let Older Americans Keep Working

August 20, 2015

Keeping older Americans in the workforce has many benefits; among them, maintaining economic growth, supplementing the labor supply in those areas where there is a shortage, and of course helping that segment of the population increase their funds for retirement as many of them haven't saved enough, say economists Laurence J. Kotlikoff and Robert C. Pozen.

However, many workers start collecting Social Security before full retirement age, permanently lowering the benefits they will receive. Many factors compel workers to take this step, such as employer incentive plans, layoffs, or even age discrimination.

There are several facts workers need to learn about Social Security benefits:

  • These payments are really a form of insurance against a catastrophic event.
  • Workers would get the maximum benefit if they wait until they are 70 to collect.
  • Yearly earnings above $15,720 are taxed at an extremely high rate of 50 percent, for those who take their benefits early.
  • However, not many know that the earning penalty will reversed once the worker reaches retirement age in the form of a permanent benefit increase.

The best approach to upgrading a system that just turned 80 years old would be to eliminate the confusing provisions that overtax recent retirees and then compensate them years later. The result would be that a greater number of those workers would remain active in the workforce.

An additional modification would be to eliminate the Social Security tax for those 70 and older, this measure would not only benefit workers but employers as well and would discourage them from discriminating against those older employees.

Thus, it is the duty of Congress to simplify the Social Security regulations so that more people can participate in the labor market.

Source: Laurence J. Kotlikoff and Robert C. Pozen, "Let Older Americans Keep Working," New York Times, August 14, 2015.

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