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Implications of Raising Social Security’s Normal Retirement Age

Implications of Raising Social Security’s Normal Retirement Age. Nicole Woo Center for Economic and Policy Research August 5, 2010. Longer life expectancies don’t translate directly into longer retirements. 20 th century saw gains of over 20 years in average life expectancy – at birth

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Implications of Raising Social Security’s Normal Retirement Age

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  1. Implications of Raising Social Security’s Normal Retirement Age Nicole Woo Center for Economic and Policy Research August 5, 2010

  2. Longer life expectancies don’t translate directly into longer retirements • 20th century saw gains of over 20 years in average life expectancy – at birth • Mostly due to increased survival during childhood = exaggerated increases in retirement length • Also gains during working years = longer working lives • Life expectancy at age 65 for men increased less than 5 years; for women, less than 3 years

  3. Expected Years of Life

  4. Younger generations will work considerably longer than workers past • A 20-year-old man born in 1899 could expect to work 39 years • If born in 1949, his work life increased to 42 years • Those born in 1999 will average 45 years of work before retirement age (under current law)

  5. Expected Working Life, Age 20 to Retirement

  6. Raising the Normal Retirement Age (NRA) Would More Greatly Impact Younger Workers Raising the NRA to 70 in 2036 = 4% reduction in benefits for workers aged 50-54 in 2007 10% reduction for workers aged 40-44 in 2007

  7. Percentage Change in Benefits due to Raising the NRA to Age 70, by Age Cohort

  8. Raising the NRA Would More Greatly Impact Lower-Income Workers • Raising the NRA to 70 in 2036 = • 3% reduction in retirement income for workers aged 50-54 in the bottom income quintile • Almost 8% reduction for lowest-income workers aged 40-44

  9. Percentage Change in Annual Income due to Raising the NRA, 40-44 Age Cohort, by Income Quintile

  10. 45% of Older Workers Have Jobs with Physical Demands or Difficult Working Conditions • 6.5 million workers over age 58 (over 1/3) have physically demanding jobs (PD) • 5 million older workers (over ¼) have jobs with difficult physical working conditions (DWC) • Over 8.5 million older workers (about 45%) have jobs with PD or DWC (“difficult jobs”)

  11. Older Workers in Physically Demanding Jobs or Difficult Working Conditions in 2009

  12. Minority Older Workers Are More Likely to Have Physically Demanding Jobs Over ½ (54%) of older Latino workers have physically demanding jobs Latino men have the largest share (62%) of older workers in physically demanding jobs Over ½ of African American (53%) and Asian Pacific American (51%) older workers have difficult jobs

  13. Share of Older Workers in Physically Demanding Jobs, by Race/Ethnicity

  14. Less-Educated Older Workers Are More Likely to Have Physically Demanding Jobs Over ¾ (77%) of older workers with less than a high school diploma have difficult jobs Less than ¼ (22%) of older workers with advanced degrees have difficult jobs

  15. Share of Older Workers in Physically Demanding Jobs, by Education

  16. Lower-Income Older Workers Are More Likely to Have Physically Demanding Jobs Over ½ (56%) of older workers in the bottom wage quintile have physically demanding jobs Less than 1/5 (17%) in the top quintile have physically demanding jobs

  17. Share of Older Workers in Physically Demanding Jobs, by Wage Quintile

  18. Raising the NRA Would Have Relatively Minor Impacts on the National Debt

  19. Resources at www.cepr.net • Patterns in Physically Demanding Labor Among Older Workers, August 2010, Hye Jin Rho • The Impact of Social Security Cuts on Retiree Income, July 2010, Dean Baker and David Rosnick • Social Security and the Age of Retirement, June 2010, David Rosnick • 2020 Debt Simulator: http://www.cepr.net/calculators/calc_deficit.html • Nicole Woo • CEPR • woo@cepr.net • 202-293-5380 x108

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