Raising the retirement age is one Social Security reform measure that continually gets proposed. But according to Richard W. Johnson, an economist at the Urban Institute who specializes in employment and retirement decisions made by older Americans, raising the retirement age would inflict serious harm on roughly one-quarter of Social Security beneficiaries.
Rising longevity is one argument often made in favor raising the retirement age. Americans live several years longer, on average, than they did when the early retirement age was introduced, and longevity is forecast to rise 2.8 years by 2050. The retirement age debate usually focuses on the FRA, but this report focuses mainly on whether the early retirement age should be increased. “If we want to raise the FRA, we also would want to raise the early age,” Johnson says. “If the gap between the two gets too large, it would create inequities.”
But increasing the early filing age would create hardships for many workers. If it were raised to age 65, the report estimates that 25% of workers aged 62-64 would face serious financial problems; that represents the share that is not working and has a health-related work limitation. Many would not be able to pass the strict requirements for Social Security Disability Insurance, in addition to ongoing reluctance among employers to hire older workers.
Further complicating the matter is that recent gains in life expectance have gone mainly to people with more education and income. Lower-income workers are more likely to retire early—and that means they will have lower incomes throughout retirement. Conversely, median income for older households without any health-related work limits rose 34% from 1996 to 2014, adjusted for household size and inflation. This was due to their greater likelihood of staying employed and receiving wage income.
What can be done? Johnson suggests exempting workers in physically demanding occupations; making the Social Security benefit formula more progressive than it already is to favor low-earners even more; expanding employment services and training, and expanding unemployment insurance for older workers. But he concedes that these would be politically challenging.
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