The Debate Over Raising the Retirement Age Should Account for Income Differences: NCPA

DALLAS, Feb. 25, 2013 /PRNewswire-USNewswire/ -- Over the past 30 years, life expectancy beyond age 65 for retiring men with below average income has risen only one year compared to an increase of six years for men with above average income, according to a study from the Social Security Administration.

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"Life expectancy at birth has increased seven years since 1970, so should the eligibility age be raised seven years as well?" asked National Center for Policy Analysis President John C. Goodman. "The problem with raising the age of eligibility, however, is the five-year difference between life expectancies for above- and below-average income men."

A new NCPA study explains how to solve the problem: raise the age of eligibility for Social Security but at the same time make the benefit formula more progressive. For Medicare, the premium payments can be made more progressive.

The study, co-authored by NCPA Senior Fellow Thomas R. Saving, a former Public Trustee of Social Security and Medicare, suggests that progressive price indexing combined with raising the eligibility age could retain the program's progressivity while slowing the growth in spending.  The study found:

  • Once longevity differences are accounted for, Social Security's progressivity is lessened, relative to estimates based on average longevity estimates by birth year.
  • However, even for the most recent group of new retirees analyzed, the program remains progressive.
  • Further, the study finds that within birth years, the program redistributes from high to low earning workers, even after accounting for income-related differences in longevity.

"Combining an increase in the retirement age for all workers with an adjustment to the benefit formula would result in a program that could be financed in the long run at the current tax rate and would retain the program's relative lifetime progressivity," said Goodman.

Full text at: http://www.ncpa.org/pub/st342

Lifetime Income, Longevity and Social Security Progressivity

The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. We bring together the best and brightest minds to tackle the country's most difficult public policy problems — in health care, taxes, retirement, small business, and the environment. Visit our website today for more information.

SOURCE National Center for Policy Analysis



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