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Longer lifespans = higher retirement ages 2010-Nov-15 at 01:02 PST

Posted by Scott Arbeit in Blog.
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When the Social Security Act was first passed in 1935, the average life expectancy in the United States was 61 years.  Today, average life expectancy in the U.S. is 79 and continuing to grow.  The Social Security Act never envisioned an average life span this high, and yet we’re still living off of age ranges from the world before World War II.

So it comes as a surprise to me that the National Commission on Fiscal Responsibility and Reform, the bipartisan committee that President Obama has appointed to look at ways to address the federal deficit and debt, has suggested that we raise the retirement age for full Social Security benefits to 68 by 2050, and 69 by 2075.

It surprises me not because it’s too shocking, but because it’s far too tame.  Unfortunately, the short-sighted reactions came swiftly.

From Panel Seeks Social Security Cuts and Higher Taxes, by Jackie Calmes, 10-Nov-2010:

Liberal groups immediately condemned the plan when news of it broke, for its Social Security and Medicare changes and for the scope of the spending cuts. The House speaker, Nancy Pelosi, in a statement called it “simply unacceptable.”

The furor on the left was not matched — yet — by a similar outcry from the right to the draft’s proposed revenue increases, cuts to the military or other options.  [This outcry came the next day. – Scott]

The plan has many elements with the potential to draw intense political fire. It lays out options for overhauling the tax code that include limiting or eliminating the mortgage interest deduction, the child tax credit and the earned income tax credit. It envisions cutting Pentagon weapons programs and paring back almost all domestic programs.

By 2050, we can expect the average human life span in the United States to be at least 120 years, and probably closer to 150.  Wouldn’t it make sense to leave Social Security only for the time when the vast majority of Americans are too old and infirm to continue to work?  Given the advances in medical technology we’ll see in the next 20 years, and then in the 20 years after that, we won’t see poor health, in general, until far later than we do now.

The only reasonable solution to our overburdened Social Security system is to index the retirement age to increases in longevity.  Although the Commission proposes exactly this, it follows that up with the 68 and 69 numbers.  I have no idea what projections they’ve looked at in terms of life span, but I’m damn sure they’re far too pessimistic.  Of course, we’ll quickly have more retirees than workers paying taxes to support them if we don’t raise the retirement age for Social Security significantly.

Just as we index benefits based on inflation, and we make cost of living adjustments annually, we need to make retirement age adjustments annually based on average life span, which will continue to grow.  Will we have the political foresight to pull that off?  Not until we have far more Integral politicians running things….