What U.S. could save by raising retirement age
TEXT OF STORY
KAI RYSSDAL: There have been strikes all over Europe for months now, protesting austerity budgets. One of the common concerns has been the various proposals to raise the retirement age in certain countries. France was basically shut down for a week and a half, you might remember, over a bump from 60 to 62 years old.
This week, the British government said it’s pushing its retirement age to 65 to 66 — six years earlier than it’d planned to do that. It’s going to save the government $8 billion in the process, so how much do you suppose we could save if we pushed up our retirement age?
Marketplace’s Alisa Roth has that story.
ALISA ROTH: Americans can retire with full benefits at 66. Raising the retirement age would save money, but it takes a while.
ANDREW BIGGS: Most of the costs of benefits paid out by Social Security today and in the near future are for people who are already in the system.
Andrew Biggs is a former Social Security official.
BIGGS: Increasing the retirement age would have no effect on benefits for people who are currently retired.
For example, a little more than 2 million people will retire this year. Altogether, 53 million people draw Social Security. This year, the government will pay out more than $700 billion in Social Security benefits. And that figure is likely to rise. Biggs calculates even if you raised the retirement age to 70, the savings after two decades would only be around $30 billion a year, which is only small piece of the total.
Biggs and others agree that even if we raise the retirement age, Social Security’s budget will come up short as baby boomers retire. Generous estimates say the extra saving would cover only about a third of the projected budget gap.
Jeff Brown is a finance professor at the University of Illinois. He says it makes sense to raise the retirement age. But there needs to be other measures, too.
JEFF BROWN: More importantly from an economic standpoint is for us to try to figure out how to get people to actually stay engaged in the workforce longer.
In any case, we are raising the retirement age. In 1983, the government decided to increase it from 65 to 67. The change didn’t start until 2000. And it won’t fully be in place for another decade.
In New York, I’m Alisa Roth for Marketplace.
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