It should be no news to anyone that Social Security is suffering from a funding crisis and has been for decades. Social Security’s ability to meet 100 percent of benefit obligations is in jeopardy sometime after the next 10 years and experts have thrown out proposals to try and solve the problem. One proposed solution has been to increase the full retirement age. For everyone born 1960 and later the full retirement age is 67. Many so called experts have claimed that because people are living longer that the retirement age should be increased, which would delay many people’s retirement and increase Social Security’s reserves, but a recent study conducted by the Center for Retirement Research indicates that only the least educated Americans and lower income Americans would be negatively impacted by such a move.
This is not the answer to solving Social Security’s funding gap. Many experts claim that the full retirement age is already too high. And, any proposal that would negatively impact less educated and lower income individuals is something that should not be considered. Below is the conclusion of the report conducted by the Center for Retirement Research, which was completed in June of 2021.
Both life expectancy and expected years of disability-free life had been trending up in the United States for decades until 2010. The resulting need to fund a longer retirement was met by calls to work longer, and the expanding capacity to work longer justified those calls. However, in the last fifteen years, slowing declines in mortality have coincided with negative health trends, raising the possibility of even slower growth in working life expectancy. A crucial question, then, is whether working longer is even possible for many people?
To answer that question, policymakers need to know whether individuals are physically capable of working: are they alive, in the community, and not encumbered by work-limiting disabilities? The analysis presented here shows that improvement in life expectancy has moderated since 2006, while improvement in working life expectancy has slowed even more, such that every year of life expectancy gained is associated with only about half a year of work capacity.
When looking across demographic groups, the picture is more concerning. The population-level gain, however modest, is driven almost entirely by high-education groups (although low-education Black women have seen similar growth). As a result, a large share of those with less than median education will not be able to work even two years beyond the early eligibility age for Social Security, even if they managed to work to 62. This problem is particularly acute among low-education Black men, who had very low working life expectancies in 2006 and experienced no improvement in the past fifteen years. A majority of this group will be incapable of work to the FRA.
In thinking of solutions for inadequate retirement savings, working longer may be a fine response for those with more education, but Black and low-education individuals, who are the least likely to have sufficient savings, are also the least well-positioned to work longer. They would also be the groups most vulnerable to further increases in Social Security’s eligibility age thresholds. New solutions for these groups need to account for their high probability of not being physically capable of extending their working lives.
