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Increase Normal ("Full") Retirement Age

The normal retirement age (referred to as the "full retirement age" by the Social Security Administration) is already in the process of rising from 65 to 67.

Argument For

Life expectancy is rising, meaning more people are reaching retirement age and retirees are living longer. In 1940, only 54% of males aged 21 were expected to live to age 65 and, if they did, their remaining life expectancy was 12.7 years. By 1998, the figures for males had risen to over 72% and 15.3 years. For women, the comparable figures in 1940 were 61% and 14.7 years By 1990, they had risen to 84% and 19.6 years). This change in life expectancy, more than any other, accounts for the long-term shortfall in social security, as it is currently structured. It makes to recognize that retirement ages should rise to match the increased life expectancies.

Just as increasing the retirement age will reduce the costs of proving a given benefit, so will it reduce the costs of employer pension plans

Argument Against

People with physically demanding jobs and those partially disabled may not be able to work longer and the health insurance costs, already rising rapidly for employers, will rise even faster as employers have an older work force.

Savings

If we raise the retirement age to 70 by 2030 and index it thereafter, the shortfall will be reduced by 68%.

If we accelerate the speed at which it rises to 67 and index thereafter, the shortfall will be reduced by 33%.

Sources:

Social Security Administration, "Life Expectancy for Social Security," http://www.ssa.gov/history/lifeexpect.html, viewed December 27, 2004, 2:11 PM EST

American Academy of Actuaries, "The Social Security Game," http://www.actuary.org/socialsecurity/index.asp, viewed December 27, 2004, 2:16 PM EST