How to save if you're retiring at 70

Dr. Christian Weller.

TEXT OF INTERVIEW

TESS VIGELAND: If that last story isn't enough to get you saving more for retirement on your own, here's more food for thought: What if you had to wait longer to collect those Social Security benefits? House Minority Leader John Boehner recently touched his finger to the third rail of American politics and proposed raising the retirement age to 70. He's not the first to make the suggestion. But we wanted to explore what that might mean for future retirees.

Dr. Christian Weller is an expert on Social Security at the Center for American Progress. Welcome to the program.

DR. CHRISTIAN WELLER: Thank you very much for having me.

VIGELAND: Let's just say up front that we're really not going to get in the party politics of the issue at this point, but I wanted you to explore with us some of the more practical implications of raising the Social Security retirement age. First and foremost, it really affects all those calculations you do for how much you need to save on your own, right?

WELLER:Well, if you raise the retirement age, it's a question not just how much more money you need to save, but also the calculation's complicated by the fact that your health will play a big role. About 35 to 45 percent of people who retire early do so because of bad health. For those people, raising the retirement age is just a benefit cut that is not buffered by other sources of income.

VIGELAND: So what does this do to the calculation overall, then? I mean -- even something as basic as these calculators that you can go online and use and try to figure out how much money you need to save for retirement -- five years is a big difference for Social Security, isn't it?

WELLER:Well, every year that you raise the retirement age either means people save more money up front or they work longer to ultimately receive the same amount of benefits. The problem with working longer, however -- the unemployment rate for people 65 and older has been trending upwards so there aren't that many jobs for those who want to work longer. The alternative is saving more -- and we just simply, from a policy perspective, don't know how to get people to save more. The saving rate in the United States has been very low for the past 20-25 years. People ultimately realize that they have too little money, but it's often too late at that point.

VIGELAND: If the retirement age were raised to 70, from what you know, would that then mean that if you waited until 74, 75 that you would get more benefits?

WELLER:Presumably the provisions wouldn't change. I think the general proposals are we go to 67, as scheduled under current law, and you just keep on going raising the retirement age until you hit 70. But you also gotta remember, for a lot of low-income family workers, their life expectancy at age 65 is about 15 years, so when they reach 70 they're looking at less than 10 years of retirement. There isn't much wiggle room to go beyond that.

VIGELAND: What the Minority leader suggested was that this new age cut off of 70 would apply to anyone who, at that point, was at least 20 years from retiring. Does that give folks enough time to re-plan based on a new age?

WELLER:In theory, 20 years should be enough time to re-plan, but we have that experience from the past that theory in practice do fall apart. Given our past experience, I'd be very doubtful that even with a 20-year lead time people will start saving more for a delayed retirement.

VIGELAND: I suppose, really, the safest way for all of us to avoid this being a problem is not to count on Social Security at all, if you can. Plan your retirement as though it's never going to be there.

WELLER:Well, Social Security will be around and people should plan it being there, otherwise they're going to save way too much money and consume way too little. When I say consume too little, basically people don't repair their homes, people don't go to the doctor when they need to. Those kinds of cuts are not particularly good for your living standards. So people should count on Social Security. Social Security will be around as a basic insurance for generations to come -- whether it will include a higher retirement age remains to be seen at this point.

VIGELAND: Dr. Christian Weller is a senior fellow at the Center for American Progress in Washington, D.C. He's been joining us to talk about this proposal to raise the Social Security age to 70. Dr. Weller, thank you so much for joining us.

WELLER:Thank you very much for having me.

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