Having read that Greek fiscal austerity involves raising their average retirement age from 53 to 67 and that their life expectancy is 79.5 years, I thought of the Social Security Act of 1935 and then 2035.
When Social Security was enacted in 1935, 5.4% of the U.S. population was over 65. With social security old age benefits starting at 65, life expectancy was close to 62. By contrast, in 2035, 20% of the U.S. population is projected to be 65 or older. The last of the baby boomers (born 1946-1964) will have turned 65 in 2030, when the over 65 population will have reached 20% and then stabilized. Even now, close to 13% of the population is 65 and over with life expectancy close to 78 years. “Full retirement age” for receiving social security benefits is 67.
Should old age benefits start closer to life expectancy projections as they did when the social security system made its first payments?
The Economic Lesson
Social security is a pay-as-you-go system; today’s workers pay the benefits for today’s recipients. When social security began, there were 42 workers for each beneficiary (life expectancy was close to 62 and benefits began at 65). Today there are close to 3.3 workers for each beneficiary while for 2030 the projection is 2.2.
Intentionally created as a universal system rather than a poverty program, social security was designed to support elderly people who could not work. Today, the Census Bureau calls the 65-74 group the “young old.”