Here’s why a Yale law professor suggests retirement age be moved to 76
Here’s a stunning suggestion: The United States government should raise the Social Security retirement age for receiving full benefits to 76, from today’s 66 to 67. That’s what Anne L. Alstott, a Yale Law School professor and author of “A New Deal for Old Age” believes. She thinks it would make things “fairer.”
Chris Farell, a blogger with Next Avenue and an “unretirement expert” had this to say about that on a recent blog post on nextavenue.org.
“Yes. Alstott has actually thoughtfully framed a moral and practical — albeit highly provocative — argument for overhauling Social Security in ways that lives up to her book’s subtitle: Toward a Progressive Retirement. She wants to redesign Social Security to offer greater support to Americans who’ve been dealt a harsh hand, due to rising inequality in income, health, longevity, disability, opportunities and family stability.
“For the well-off, age 65 now represents late middle age. It isn’t until age 80 or so that the average better-off American feels old or faces serious impediments to work and healthy leisure,” Alstott writes in the book’s introduction. “By contrast, many lower earners struggle to stay in the workforce to age 65. Many face disability in their early 60s, and many more confront limited job options and long-term unemployment.”
“Alstott rightly maintains that the Third Age phenomenon calls for putting the ability to work at the core of any Social Security reforms.
“And here’s another Social Security proposal from Alstott that might make you sit up in your chair: The government should repeal the Social Security spousal benefit. (Under current law, with the spousal benefit, if you’re married, you may be able to get Social Security benefits equal to as much as half your spouse’s Full Retirement Account.) Alstott calls the spousal benefit “an artifact of family life in the mid-twentieth century, when most wives did not work out of the home.”
“You may find Alstott’s ideas disconcerting. But what makes her book so important is that it addresses the reality that Americans in the aggregate are living longer, healthier lives than in the past. She uses the catchphrase Third Age (I prefer unretirement). Alstott rightly maintains that the Third Age phenomenon calls for putting the ability to work at the core of any Social Security reforms.
“As a matter of justice over the life cycle, the [Social Security] program engages in too much redistribution from younger to older workers, compared with the ideal program, which would link payouts to work disability,” she writes. “A reorientation of Social Security to focus on work disability is consistent with the program’s original mission.”
“Her four guiding principles are: take life-cycle justice into account when considering Social Security policy design; the intergenerational benefits and obligations of social reciprocity; the state recognition of cumulative disadvantage from multiple inequalities that burden low earners and preserving individual dignity. I particularly found her insights about intergenerational reciprocity refreshing at a time when so many commentators are stoking intergenerational rivalry.
“Here’s why Alstott thinks 76 should be the full retirement age for Social Security. The current formula imposes the same percentage lifetime penalty for taking early retirement benefits — a 30 percent haircut at age 62 compared to benefits at full retirement age — on every filer no matter their income or health. Everyone also gets the same percentage gain in the amount of Social Security benefits received for delaying filing up to age 70 (124 percent of what you’d get claiming at Full Retirement Age).
“In sharp contrast, Alstott thinks low earners should be able to collect nearly a full retirement benefit at age 62, with only a 10 percent penalty. In other words, the person who worked the low-wage, checkout counter job at a big box retailer without retirement savings could file at 62 and get close to her full Social Security benefit right away. Conversely, the highest earners would pay a steep 80 percent penalty for filing at age 62, a clear disincentive to filing. Everyone would get the maximum benefit at age 76.
“Look at it this way: You could still file beginning at 62 or all the way up to 76. Along the way, you’d pay a lower penalty for filing early the lower your lifetime income, and vice versa. The financial penalty would shrink for everyone the closer they get to 76.
“Alstott’s proposal is a clever way of redirecting Social Security benefits toward the disadvantaged without explicitly using means-testing to accomplish that goal.
“The basic idea is that the retirement age would remain universal, but the timing penalties for early retirement would be progressive, permitting lower earners to retire earlier than higher earners with less financial cost in doing so,” she writes. “Today, with fixed penalties for retiring before age 70, a low earner who retires early sacrifices retirement security for the rest of her life. By contrast, progressive retirement timing would ensure that low earners who claim early receive 90 percent of their maximum benefit.”
“Clearly, her idea is a dramatic shift from current practice. There would need to be a period of transition. Alstott suggests those currently in their 50s or younger probably would have enough time to adjust their finances and expectations to this new system; everyone older would play by the current rules.
“What do you think?”
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