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Tuesday, May 24, 2005

People Are Young When They Get Old Today

Men who retired in 1940 at the age of 65 could expect almost 12 years of retirement (women 13.4 years). Today, a man retiring at 65 can expect 16 years more retirement life (women 19). Bruce Bartlett analyzes the increased life expectancies for people worldwide since 1900 and suggests that extending retirement is not an unreasonable proposal. This is true especially when the "contributions" to social security cannot actuarially cover the costs of retirement.

Says Bartlett:

The nature of work and compensation has also changed so as to encourage earlier retirement than the nation can afford. As economist Eugene Steuerle pointed out in recent congressional testimony, in the 1940s the average worker didn’t begin drawing Social Security until age 68—three years above the normal retirement age. At that time, the option of early retirement at age 62 didn’t even exist.

Today, a majority of workers begin drawing Social Security benefits at age 62. If they waited as long as their parents, they would have to wait until age 74. Because people are drawing benefits earlier and living longer, Mr. Steuerle estimates that total Social Security and Medicare benefits for a typical two-earner couple have risen from $195,000 in 1960 to $710,000 today. He estimates that without reforms, this figure will rise to $1.1 million in 2030 (all in 2005 dollars).

Now that I am nearing 50 (still younger than Mick), 62 seems too young to quit working. People today are vibrant well into their 70's with improved working conditions and the wonders of our unfairly maligned pharmaceutical industry. However, I cannot understand why people believe this partially-paid vacation (early retirement) should be largely borne by their children and grandchildren. There should be private investment accounts so people can amass and own their savings with growth and can then decide to retire when they see fit. As Bartlett shows, the current system is financially, actuarially and demographically untenable.

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