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October 17, 2017

The High Cost of Raising the Retirement Age

Raising the retirement age for Social Security should save money, but it just brings older, sicker people into the system.

The next time the issue of raising the Social Security retirement age comes up, consider this: today, people are retiring in poorer health than their parents did. A fact that calls into question the idea of raising the retirement age.

People in their 50s and early 60s are already in poorer health than their parents were, a new study finds. Unfortunately, policymakers have not been paying attention to this.

Cost-saving moves to raise the Social Security retirement age, the age at which people can begin receiving their full monthly Social Security benefits, tend to overlook the issue of health. At first glance, raising the retirement age seems to make sense: the move would save money. People are also living longer, and many are working to a later age and so they shouldn't need the Social Security income until later in their life.

But this analysis is flawed, according to the findings of a University of Michigan study. People who are living longer are likelier to be in poorer health than their parents were. And poor health often makes it difficult to keep working.

People who retired later in life were likelier to be limited in their ability to perform at least one basic daily living task by themselves, such as shopping for groceries, taking medications or getting out of bed.

The researchers compared the health of people born in 1937 or earlier, people who could receive full Social Security benefits at age 65, to those born between 1960 and 1962 — those who will have to wait till they are 67 to receive benefits. Overall, the younger group had more health problems and tended to rate their health as poorer than people born earlier did.

The mental abilities of people in their 50s, born in 1960 to 1962, were also inferior to those at the same age who were born earlier. And while there weren't large differences between the groups in physical abilities, the authors point out that people who rely on Social Security for most or all of their retirement income tend to work at occupations that are more physically demanding, making it harder for them to work to an older age.

Perhaps most importantly, people who retired later in life were likelier to be limited in their ability to perform at least one basic daily living task by themselves, such as shopping for groceries, taking medications or getting out of bed.

Social Security retirement age changes were made when those who are now in their 50s and 60s were in their 20s and 30s. Not only were people born later expected to live longer than their parents did, it was assumed that this expanded life span would be accompanied by improved health.

But this study found that that's not what happened. Far from it.

The study appears in Health Affairs.

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