Implications of Raising Social Security`s Normal Retirement Age

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Implications of Raising
Social Security’s
Normal Retirement Age
Nicole Woo
Center for Economic and Policy Research
August 5, 2010
Longer life expectancies don’t translate
directly into longer retirements
•20th century saw gains of over 20 years in average life
expectancy – at birth
•Mostly due to increased survival during childhood =
exaggerated increases in retirement length
•Also gains during working years = longer working lives
•Life expectancy at age 65 for men increased less than 5
years; for women, less than 3 years
Expected Years of Life
Younger generations will work
considerably longer than workers past
•A 20-year-old man born in 1899 could expect to work 39
years
• If born in 1949, his work life increased to 42 years
•Those born in 1999 will average 45 years of work before
retirement age (under current law)
Expected Working Life, Age 20 to Retirement
Raising the Normal Retirement Age (NRA) Would
More Greatly Impact Younger Workers
Raising the NRA to 70 in 2036 =
•4% reduction in benefits for workers aged
50-54 in 2007
•10% reduction for workers aged 40-44 in
2007
Percentage Change in Benefits due to Raising the
NRA to Age 70, by Age Cohort
Raising the NRA Would More Greatly
Impact Lower-Income Workers
Raising the NRA to 70 in 2036 =
•3% reduction in retirement income for
workers aged 50-54 in the bottom income
quintile
•Almost 8% reduction for lowest-income
workers aged 40-44
Percentage Change in Annual Income due to Raising
the NRA, 40-44 Age Cohort, by Income Quintile
45% of Older Workers Have Jobs with
Physical Demands or
Difficult Working Conditions
•6.5 million workers over age 58 (over 1/3) have physically
demanding jobs (PD)
•5 million older workers (over ¼) have jobs with difficult
physical working conditions (DWC)
•Over 8.5 million older workers (about 45%) have jobs
with PD or DWC (“difficult jobs”)
Older Workers in Physically Demanding Jobs or
Difficult Working Conditions in 2009
9,000
Workers not in Physically Demanding Jobs or
Difficult Working C onditions
8,000
Workers in Physically Demanding Jobs or Difficult
Working C onditions
7,000
Workers in Physically Demanding Jobs
T housand s of Workers
6,000
5,000
4,000
3,000
2,000
1,000
0
58-61
62-65
66-69
70+
Minority Older Workers Are More Likely to
Have Physically Demanding Jobs
•Over ½ (54%) of older Latino workers have
physically demanding jobs
•Latino men have the largest share (62%) of older
workers in physically demanding jobs
•Over ½ of African American (53%) and Asian Pacific
American (51%) older workers have difficult jobs
Share of Older Workers in Physically Demanding
Jobs, by Race/Ethnicity
60
Share of Workers (Percent)
50
40
30
20
10
0
White
Black
Latino
Asian
Other
Less-Educated Older Workers Are More
Likely to Have Physically Demanding Jobs
•Over ¾ (77%) of older workers with less than a
high school diploma have difficult jobs
•Less than ¼ (22%) of older workers with
advanced degrees have difficult jobs
Share of Older Workers in Physically Demanding
Jobs, by Education
70
60
Share of Workers (Percent)
50
40
30
20
10
0
Less than
High School
High School
Some
C ollege
C ollege
Degree
Advanced
Degree
Lower-Income Older Workers Are More
Likely to Have Physically Demanding Jobs
•Over ½ (56%) of older workers in the bottom
wage quintile have physically demanding jobs
•Less than 1/5 (17%) in the top quintile have
physically demanding jobs
Share of Older Workers in Physically Demanding
Jobs, by Wage Quintile
60
Share of Workers (Percent)
50
40
30
20
10
0
Bottom
Second
Middle
Fourth
Top
Raising the NRA Would Have Relatively Minor
Impacts on the National Debt
Comparison of Reduction in Publicly Held Debt in 2020 by Various Policies
2500
billions of dollars
2000
1500
1000
500
0
Allow
Medicare to
negotiate
drug prices
Financial
Quick end to
Increase
Increase
transaction
Irag and
gasoline tax
cap on
tax
Afghanistan by 50 cents taxable SS
wars
per gallon earnings to
90%
C onvert
mortgage
interest
deduction to
15% credit
Raising the
normal
retirement
age to 70
Resources at www.cepr.net
•Patterns in Physically Demanding Labor Among Older
Workers, August 2010, Hye Jin Rho
•The Impact of Social Security Cuts on Retiree Income, July
2010, Dean Baker and David Rosnick
•Social Security and the Age of Retirement, June 2010,
David Rosnick
•2020 Debt Simulator:
http://www.cepr.net/calculators/calc_deficit.html
Nicole Woo • CEPR
[email protected] • 202-293-5380 x108
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