Raising retirement age hurts poor, low-income workers
WASHINGTON — Raising the retirement age for Social Security would disproportionately hurt low-income workers and minorities, and increase disability claims by older people unable to work, government auditors told Congress.
The projected spike in disability claims could harm Social Security’s finances because disability benefits typically are higher than early retirement payments, the Government Accountability Office concluded.
The report, obtained by The Associated Press ahead of its scheduled release Friday, provides fodder for those opposed to raising the eligibility age for benefits, as proposed by the leaders of President Barack Obama’s deficit commission.
“There’s more to consider than simply how much money the program would save by raising the retirement age,” said Sen. Herb Kohl, D-Wis., chairman of the Senate Special Committee on Aging.
The report shows an unequal effect on certain groups of people, he said last Thursday, and many of them “would have little choice but to turn to the broken disability program.”
Under current law, people can start drawing reduced, early retirement benefits from Social Security at age 62. Full benefits are available at 66, a threshold gradually increasing to 67 for people who were born in 1960 or later.
The deficit commission’s leaders, Democrat Erskine Bowles and Republican Alan Simpson, last week proposed a gradual increase in the full retirement age, to 69 in about 2075. The early retirement age would go to 64 the same year.
Under their plan, the new thresholds wouldn’t be fully phased in until today’s 4 year olds are ready to retire.
AARP criticized the recommendations and House Speaker Nancy Pelosi, D-Calif., called them “unacceptable.” Experts, however, warn that Social Security is on a financially unsustainable path that will worsen as people live longer and collect more benefits.
For many workers, reducing early retirement payments or delaying eligibility would provide an incentive to put off retiring, resulting in more earnings and potentially more savings for later in life, according to the watchdog agency’s report.
But it “could create a financial hardship for those who cannot continue to work because of poor health or demanding workplace conditions,” the report said.
The report, requested by Kohl’s committee, draws on research by outside groups as well as interviews with Social Security officials and data from the Social Security Administration. Researchers also analyzed data from the Health and Retirement Study, a continuing study of older Americans by the University of Michigan’s Institute for Social Research.
About one-fourth of workers age 60 and 61 — just under the early retirement age — reported a health condition that limited their ability to work. Among those older workers, blacks and Hispanics were much more likely to report fair or poor health than whites, according to the report.
Less healthy older workers had lower incomes, less accumulated wealth and were much less likely to have attended college.
“Some people just can’t continue to work beyond age 62 for either health reasons or they’re just not able to find jobs,” said David Certner, legislative policy director for AARP. “Just because we tell people they should work longer doesn’t mean that there are employers out there willing to hire people.”
Workers older than 55 are less likely than younger workers to lose their jobs, the report said. But when older workers get laid off, they are less likely to find other employment.
Nearly 54 million retirees, disabled workers, surviving spouses and children now get Social Security. Payments for retired workers average $1,020 a month; disability benefits average $929 a month. In 75 years, 122 million people, or one-fourth of the population, will be drawing benefits.
On its current path, Social Security is projected to run out of money by 2037, largely because of aging baby boomers reaching retirement. The longer action is delayed, the harder it will get to shore up the program.
The GAO report says that raising the age when workers qualify for full benefits would save money. But raising the age when workers can get early benefits would hurt the program’s finances because of the expected increase in disability claims.
The plan from Bowles and Simpson promotes shared sacrifice: High-income workers would pay more in payroll taxes to support the system; current retirees would get smaller annual increases in benefits; future retirees have to wait longer to qualify for full benefits.
“We put a hardship exemption in there for people who have, what people are always talking about, backbreaking jobs, people that really need to retire at 62,” Bowles said. “We think it is balanced.”