A new study from researchers associated with the Federal Reserve Bank of Dallas suggests that the availability of early retirement benefits makes people poorer. Of course, chaining people to their jobs until they drop dead might also make them less poor, in one sense.
There's a ruthlessly mercenary aspect to this -- the unstated premise that nothing in life can have worth unless it can be measured in dollars. There's also a failure to understand that many, perhaps most, who retire at age 62 are not doing so because they really want to retire but because they're too sick to go on working even though they're loath to file a disability claim.
This is a report that could only have been written by younger people.
9 comments:
I don't know about your conclusion. It's close to half of the folks that file for retirement that do so at age 62. All of them are disabled? Some no doubt are beat up physically and probably should retire. Most of the ones I talk to just are doing so because they are of the opinion that maybe they won't live to the break even point. Those folks would work another 2-3 years if the minimum retirement age were raised.
Retiring at 62 not only makes the worker poorer but should it be the person with the higher SSA benefit, it makes his or her survivor poorer too. Work the 4 years and get a 33% boost in your benefit (from 75% to 100%).
The opening statement makes no sense with the premise. If SS is in financial stress, why would eliminating early retirement help if early retirement pays out less in the long run and makes seniors poorer? Shouldn't we encourage more to take it, not less. Frankly, this only works as a solution if those who retire at 62 are more likely to die earlier. I knew a man who worked 50-60 hours a week for the last 7 years of his life, in order to increase his SS. Then, he died of a heart attack right before his 66th birthday. I really think the individual can make the decision that is best for them. If we need more money, raising the cap is the first place to start. Means testing could be looked at, too.
They could keep early retirement but raise the age to 64 so it is still 3 years before full retirement. This has been proposed in the past.
Ending early retirement may be drastic but it has been suggested in the past to increase early retirement age to 64 so that it will remain 3 years before full retirement age.
Well this study was perhaps written by younger people, but it was not easy to sift through the history of why OASDI offers retirement at age 62. From what I could find, this began in the 1956 amendments and was only offered to women. Later, during the recession of 1960-61 (when I remember my own father being unemployed for over a year), it was extended to men as a way of easing the pain of a down economy. Considering that a worker takes about a 30% hit off already meager OASDI benefits for life, early retirement is not a decision to be made lightly. I agree with Charles that the option of taking early retirement is a boon to poorer workers who may have tried and failed to receive disablity benefits or the better-off who were able to save enough to augment the reduced benefit and cover this health insurance before Medicare kicks in. In any case, it does save the program $ and it would be shortsighted to eliminate the option. I was surprised that there were no other comments. Maybe everyone else is away having fun this holiday weekend.
What you don't mention, is that when someone goes to the SSA Field Office to sign up for early retirement, the worker asks them if they want to file for SS Disability - and they all say yes. This is one of the things that is inflating the number of people applying for SSD.
I don't see that the researchers suggested raising the Social Security early eligibility age (EEA). They stated that it has been proposed, so to look at the possible effects, they compared retirees in the period just before to those just after the EEA was reduced in 1961. While their results could be used to support raising the EEA, they give some good reasons for caution. Raising the EEA would be very unpopular and wouldn't save much (if any) money, so I think it is very unlikely.
One way to stop people from taking early benefits (if they don't need to) is to stop trying to undermine faith in the system - saying things like "Social Security is going broke." If you believe this, why wouldn't you take benefits as early as you can? Even pointing to the possible 25% or so drop in benefits if the trust fund runs out gives a good reason to claim early (this is at least a possibility, but I think it is very unlikely).
A change I would like to see is at the opposite end - let people delay benefits past age 70 and keep increasing the benefit levels so they are actuarially fair.
I will be turning 50. I never expected to have an early retirement available at age 62. I do not count on having early retirement at 65 or Medicare available then. I expect to get screwed to 70 or near there from the system because the largest cohort never planned on their retirement and increased the taxes a small portion 4 decades ago.
If and when a plan comes along to privatize, I am 100% behind it.
It isn't always about the money. There are other things to consider. Some of us have planned for retirement from our first day at work. Yes, people do that, not many but some do. (See story of Ant and Grasshopper for the Readers Digest Condensed version)
I have always planned to file early RIB, reduce work hours to match the max allowed income and cut down to a two or three day week. This would allow me time to do and see many of the things that I want to before I am too old and not capable of getting to some of the locations due to health and overall fitness. With my home already paid for, my retirement needs will be very reasonable, even when factoring in the growth of medical and medication costs. That is until the Boomers take away my Medicare to pay for theirs like they want to take away my early retirement.
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