At 75, our Social Security program is starting to show its age. The major source of retirement income for millions of Americans, Social Security is running a significant cash-flow deficit for the first time in decades.
Worse, its long-term financial picture is bleak. Social Security has promised $7.7 trillion more in benefits over the next 75 years than it will take in from payroll taxes. The deficits begin in about six years.
Doing nothing is not an option. Social Security can cover all promised benefits for now. But if changes aren’t made fairly soon, all retirees will eventually face 22 percent benefit cuts.
Fixing Social Security will not be easy. No silver bullet can painlessly eliminate the deficits and enable the program to keep paying the same level of benefits it has in the past. Fixing Social Security will require a combination of several reforms — some more difficult than others.
One needed reform is to increase the Social Security retirement age. This should be accompanied by other incentives, such as eliminating the Social Security payroll tax for employees who are willing to work beyond their normal retirement ages.
Increasing the Social Security eligibility ages would simply reflect longevity improvements that have already taken place. Future retirees will live much longer on average than their grandparents did. Social Security must reflect that increased longevity by increasing retirement ages for both full benefits and early retirement benefits. Otherwise, recipients will spend an ever higher proportion of their lives living at the expense of their children and grandchildren.
Life expectancy has already increased substantially since 1950. Males born in 2004 can expect to live almost 10 years longer than those born in 1950; women can expect to live nine years longer.
When the Social Security program was created in 1935, 65 year-old men could expect to spend about 13 years in retirement — 16 percent of their lifetime. Women of the same age averaged 15 years — or 18 percent of lifespan — in retirement. However, only a little more than half of all adults over age 21 lived to reach retirement age.
Today, a male retiree born in 1940 will spend 19-25 percent of his life collecting Social Security benefits — depending on whether he retired age 65 or chose early retirement. A woman born in the same year will collect benefits for 21-27 percent of her life.
Social Security has not kept pace with these changes. Congress has not changed the age for receiving full benefits since 1983, when it approve a phased increase leading to retirement at age 67 in 2022. The early eligibility age remains unchanged since 1961.
Eligibility should be increased to age 68 by 2023 for full benefits and to age 65 from early retirement, but it’s not a step that I recommend lightly.
Many who wish to work longer may have health issues or other disabilities that make it impossible to delay retirement. Workers with physically demanding jobs are most likely to face these issues. They should not be penalized by higher age requirements. Instead, they should receive benefits through Social Security’s Disability Insurance (SSDI) program until they reach the new retirement ages.
Social Security is and should remain a key part of Americans’ retirement security system. Congress must have the courage to let some of today’s workers know they will need to work longer before they can receive Social Security benefits.
This may not be a pleasant message, but it is a fair one. Further delay will only force Congress to make an even more unpalatable decision as Social Security’s finances continue to worsen.
David John is senior research fellow in retirement security at The Heritage Foundation (Heritage.org), a conservative think-tank located on Capitol Hill. Readers may write him at Heritage, 214 Massachusetts Avenue NE, Washington, DC 20002
