In a recent San Francisco Chronicle/SFGate op‐ed, Eugene Steuerle, Chair and Fellow at the Urban Institute, advocates lowering the heat on the debate over increasing Social Security’s “Retirement Age.” Let’s turn up the light. Here are why Mr. Steuerle’s “myths” are in fact true:
Supposed Myth, Actual Truth 1: Increasing the retirement age will reduce benefits.
For every year that Social Security’s statutorily defined “Retirement Age” is increased, its monthly old-age benefits go down by approximately 6 to 7 percent, irrespective of whether the worker claims benefits at age 62, age 70, or any age in between. (See attached chart.)
Mr. Steuerle confuses this point by focusing on average lifetime benefits, but that measure is irrelevant. Social Security is insurance against the loss of monthly wages in the event of disability, death, or old age. Women live longer than men, but no one argues that woman who earns the same wage as her male counterpart should get a smaller monthly Social Security check because she is part of a demographic that on average lives longer.
Policymakers should be asking what level of monthly benefits is appropriate for Social Security to provide, can we afford it, and do we as a nation want it. I believe that benefits are too low today, averaging just $1,071, less than full-time minimum-wage work, at a time when private pensions are becoming less adequate and available and when Americans have lost trillions of dollars in investments and home equity. We can afford Social Security’s current level of benefits. The entire projected shortfall is just 0.6 percent of Gross Domestic Product, about the same as extending the Bush tax cuts for the top two percent of the income scale. Poll after poll has made clear that Americans value Social Security, believe that it is more important than ever, do not want the retirement age increased, and are willing to pay more to ensure it continues to pay all scheduled benefits.
Supposed Myth, Actual Truth 2: Increasing the retirement age discriminates against low-income workers.
Mr. Steuerle once again confuses the issue by focusing on the fact that low-income workers receive a disproportionate share of disability benefits. What he fails to point out, however, is that the very reasons that low-income workers constitute a higher proportion of disabled workers are among the same reasons that lower-income workers disproportionately have to stop work and retire early. Not all workers who work in physically demanding and dangerous jobs become disabled, but that does not mean that they can remain on the job forever. Raising the “Retirement Age” reduces early retirement benefits substantially. When the “Retirement Age” for Social Security was age 65, a worker claiming benefits at age 62 received 20 percent less a month, simply because of claiming benefits three years early. Once the “Retirement Age” is 67, workers claiming early retirement benefits will receive 30 percent less each month, simply because they claim early. If the “Retirement Age” is increased to age 70, those workers claiming benefits at age 62 will receive 43.5 percent a month less.
Supposed Myth, Actual Truth 3: Increasing the retirement age makes Social Security reform regressive.
Mr. Steuerle makes the point that changing the COLA and other proposed benefit cuts are arguably even more regressive than raising the “Retirement Age.” Moreover, he argues that one could develop a package that contains progressive elements. Neither point changes the fact that raising the “Retirement Age” will be hardest on those of low-income. A truly progressive solution would be to have no increase in the “Retirement Age” and no other benefit cuts, but instead simply have those who can most afford to pay somewhat more, do so. This is what the American people say they want, according to polls.
Supposed Myth, Actual Truth 4: Social Security’s Old-Age Insurance goes to the old.
Mr. Steuerle focuses on seniors’ work lives when Social Security was first enacted, in order to make the oxymoronic argument that old-age insurance goes to people who are not old. What he fails to mention is that at the time of enactment, every state but New Mexico had poorhouses for those who could no longer support themselves and had no relatives willing or able to take them in. There are some among us who seem happy to turn the clock back and have Americans work until they drop. This is not Mr. Steuerle’s view, I hasten to add. Nor is it mine. I agree with the late Vice President Hubert Humphrey when he so eloquently said, “[T}he moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.”
Supposed Myth, Actual Truth 5: The elderly need to fear such Social Security reforms as increasing the retirement age.
Mr. Steuerle seems to buy the “Greedy Geezer” slander that older people care only about themselves. In the American families I know, grandparents love their grandchildren and want to ensure that they are economically secure as they age. Seniors are most active in the issue of Social Security because they have the experience and wisdom to understand the important role Social Security plays in providing vital economic security to all Americans. They very much should fear that, without their active clear voices, their children and grandchildren will be less well protected in the unfortunate event of disability or death of a provider or the fortunate event of living very long lives.
Mr. Steuerle believes the heat should be turned down on today’s debate. In contrast, in light of the current attraction of some elites to proposals that weaken Social Security’s vital protection, I believe that the heat is not yet high enough.
Explanatory Note: This chart illustrates the impact on monthly benefits that results from changing Social Security’s statutory “Retirement Age.” It is based on a hypothetical worker whose wage record entitles him or her to $1,000/month at the statutory “Retirement Age.” The dollar amounts will vary with a worker’s particular wage record, but the percentage reductions shown are the actual reductions for all workers. They do not vary with earnings. The dollar amount shown is the benefit paid monthly for the rest of the worker’s life, adjusted only for inflation once it has begun to be received.
Age 65 is the statutory “Retirement Age” for beneficiaries born prior to 1938; age 67 is the statutory “Retirement Age” for beneficiaries born 1960 or later. 42 U.S.C. §416(l) The earliest age a worker can claim Social Security old age benefits is age 62. 42 U.S.C. §402 House Minority Leader John Boehner (R‐OH), among others, has proposed increasing the statutory “Retirement Age” to age 70. This chart assumes that the earliest age at which benefits can be claimed will remain age 62 even if the statutory “Retirement Age” is raised to age 70.
42 U.S.C. §402(q) and §402(w) specify the actuarial adjustments when benefits are claimed before or after the statutory “Retirement Age.” §402(w)(6)(D) provides that for workers reaching age 62 after 2004, benefits are increased by two thirds of 1% for every month of work, up to age 70, after the statutory “Retirement Age,” and that is the adjustment factor used in the chart. As a matter of historical fact, the transition to a larger adjustment factor and to a higher statutory “Retirement Age," meant that when the statutory “Retirement Age” was 65, the adjustment factors varied with year of birth, in accordance with §§402(w)(6)(A), (B), and (C).
Source: The benefit amounts in the chart were calculated by Nancy J. Altman, Co‐Director, Social Security Works. They have been reviewed for accuracy by the Chief Actuary, Social Security Administration.