Delaying Retirement Age May Not Save Social Security

21-May-1998 12:00 AM EDT

University of Wyoming

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DELAYING RETIREMENT AGE MAY NOT SAVE SOCIAL SECURITY

A recommendation to delay the retirement age to 70 in an effort to strengthen the Social Security system is not likely to succeed, according to a University of Wyoming professor who has studied careers of older workers.

The National Commission on Retirement Policy (NCRP) on Tuesday recommended extending the age to receive full social security benefits to 70 by the year 2029. This was one recommendation to help save the Social Security system threatened with collapse because of the immense numbers of baby boomers who will be eligible for payments beginning within the next decade.

"Delaying retirement may be a reasonable solution from an actuarial viewpoint because it provides a longer time period over which to make contributions and it defers the date at which benefits must be paid," says Martin Greller, a professor in the UW College of Business. "But it makes an assumption not supported by facts. It disregards that half of the population is out of the workforce by age 58."

Greller points out that the age at which most people stop working is far younger than 65. Despite the recognition that people live longer, the passage of age discrimination laws and an increased national concern for the adequacy of post-retirement income sources, people still do not work any longer. If anything the trend has been toward earlier retirement.

"So a plan that encourages people to work an extra five years beyond age 65 isn't likely to be successful if more than half the workforce has left seven years before they reach age 65," he says.

"Simply changing the social security laws without also doing things to encourage people to keep investing in their own careers and encouraging them to look towards a longer career will not keep people working at their maximum earning capacity through their 60s," he says.

"Typically workers who will leave their employers after age 55 will eventually seek employment, and they find the search difficult. It takes longer than it would for a similarly situated younger person. When they find employment it is often in a less responsible and lower paying position. By the time the individuals are re-employed, more than one person of a similar age will be out of work to replace them in the ranks of those out of the workforce. So the proportion of people contributing to Social Security and the amounts they contribute decline with age prior to age 65," Greller says.

For the most part employers are indifferent to the retention of older workers, he adds. "If it is a national priority to extend working life, the delay of individual benefits will need to be accompanied by incentives to employers," Greller says.

The NCRP, which included members of Congress and the private sector, said they hoped to draft legislation based on the plan within two weeks, for submission to the next Congress in 1999 and for implementation starting in the year 2000. -30-

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