Over the past several decades, the age of retirement has steadily been rising; it is set to rise to 67 years as established by the 1983 Amendments to the Social Security Act. While this progression is important, the decision has been met with some controversy. However, in order to operate a sustainable system and support retirees as best as possible, a higher retirement age is necessary and beneficial to the nation as well as the individuals who access social security funds.
Retirement Age History
Historically, the retiree demographic has accounted for a small fraction of the overall population. One hundred years ago, retirees consisted of roughly 1 percent of all United States citizens; by 2000, this percentage had risen to about 15 percent. These numbers alone do not demonstrate the significance in the rise of retirees in regards to the distribution of government funds allocated for the purpose of supporting the livelihood of retirees.
In 1910, the average life expectancy was 50 years but the average age of retirement was 74 years. This discrepancy shows that individuals who retired were few in number because of the life expectancy, and as a result, the low percentage of retirees did not drastically affect the government resources, especially prior to the integration of the Social Security Act.
Presently, the average life expectancy has risen by more than 20 years, but at the same time, the average age of retirement has dropped to the low 60s. Because of this, more individuals are retiring at a younger age and living longer than retirees a century ago. This means that retirees have become a larger demographic, putting considerable strain on available funds and resources.
The Social Security Act was passed by President Roosevelt in 1935. This piece of legislation was implemented as a means of providing financial support to retirees based on their lifetime payroll tax contributions. Since its inception, the Social Security Act has benefited tens of millions of Americans, and while the system had some initial flaws, its integration has been instrumental in providing economic security for retirees.
Why Raise the Age of Retirement
Already, the age of retirement has risen, but the retiree population continues to rise due to the increase in average life expectancy. With more people retiring and expecting to live for an average of 20 more years, retirees are guaranteed economic support for much longer than the population has ever needed before. In order to accommodate the growing need for financial assistance across the expanding population of retirees, the government (particularly the Social Security Administration) is forced to either find ways to increase their funding or limit the amount of support they are able to allocate to individuals.
Opponents of the desire to raise the age of retirement argue against the implication that older Americans will be forced to remain in the workforce. Another issue commonly raised is that Americans are able to first claim their benefits at the age of 62; the age that is rising is simply the age at which citizens can claim their benefits at their full amount. Whatever the solution is to benefiting older Americans without straining the Social Security budget, raising the age of retirement is arguably the first step to identifying and implementing a sustainable model.
Destry Witt writes independently of his business, RELiANCE Investing, Inc., which is a Registered Investment Advisor only. This information is not intended to be personalized. This content is for informational purposes only. Nothing presented here should be construed by anyone as an invitation or solicitation to buy or sell any investment.