Actuaries Insist We’ve Got to Retire Later
Early retirement, bah! The people who measure our life spans say Social Security should be less something that kicks in at 65 and more something Americans tap for, say, their last 20 years.
Mention fixing Social Security — projected by various accounts to be insolvent within a decade or three — and politicians of all stripes begin to lose their cool. George W. Bush's domestic agenda in his second term was largely undone by an aborted attempt to partially privatize the program. Election-year officials regularly trade barbs over who cares less about protecting our grandmothers. Former House Majority Leader Dick Armey just this week called the program a Ponzi scheme.
The quagmire calls out for some eminently sensible — boring, even — pragmatists. Into this void steps the least sexy association in town, the American Academy of Actuaries. The group has been quietly, methodically advocating for one solution central to any suite of reforms: We must raise the retirement age. And they should know, right?
"People are living longer, in short," said Frank Todisco, the academy's senior pension fellow. "When people live longer and you have a fixed retirement age, it means a program like Social Security is going to get more and more expensive."
Actuarially speaking, a 65-year-old man in 1940 was expected to live on average for another 11.9 years into retirement. Come 2035, that same 65-year-old man can look forward to another 19 years of life (for his lucky wife: 21.1 years).
When actuaries talk in this context about increased longevity, they aren't looking at trends in life expectancy at birth. Those statistics have changed dramatically over the last several generations due largely to improvements in the infant mortality rate. The stat more relevant to Social Security, Todisco says, is how much longer you're expected to live once you reach retirement age.
That number has been expanding thanks to advances in medical technology and health care, particularly for elderly ailments like cardiovascular disease. Some critics cast the suggestion that people should therefore work longer and wait another few years until Social Security kicks in as a cut in benefits. But Todisco frames it differently.
"If you keep the retirement age the way it is, that's equivalent to an automatic expansion of the system, because as people live longer, they'll collect more and more in lifetime benefits," he said. "Increasing the retirement age is a way of stemming that automatic expansion of the system."
At play is how we define Social Security's goals: Should the program ensure security for a set period of our final years (counting backward from the end of life expectancy), or ensure security for the expanding remainder of our lives (going forward from an arbitrary age like 67)?
When Social Security was created in 1935, no mechanism was built into the program to periodically adjust for changes in longevity. Through separate amendments, the retirement age has been adjusted once, in 1983, from 65 to 67. That change is being slowly phased in over time — as Todisco says we should also do with any new adjustments — and won't be fully in place until 2027 (when the cohort born in 1960 reaches retirement age).
Ideally, Todisco says, raising the retirement age would signal to people that they should also work longer (we don't want 68-year-olds sitting around with neither paycheck nor pension). But he's aware of the counterarguments to this logic: Physically demanding jobs are harder to do as a person gets older, and older workers have a tougher time finding employment. And those improvements in life expectancy that actuaries cite have not been evenly distributed across socioeconomic groups, so that an increase in the retirement age would unfairly penalize segments of the population not expected to live to their late 80s.
"Those are all really important and legitimate concerns, but addressing them by holding down the Social Security retirement age for everybody is a very, very expensive way to address those concerns," Todisco said. "It would be more cost-effective to address them outside the Social Security program through other public policies."
The AAA doesn't spell out exactly what those policies should look like or even what age we ought to set for retirement, but the idea needs to be part of any reform, the group has concluded. And maybe in saying so they can create a little political cover. Imagine hot-headed politicians falling back on this boring but convincing slogan: The actuaries say we have to!
"That's not our objective, to give anybody cover," Todisco said. "But obviously, the whole idea of appointing a commission politically is to try to make it easier to get something done and enact some decisions."