Actuaries to Congress: Raise Retirement Age for Social Security
August 5th, 2008
The American Academy of Actuaries, a professional association representing 16,000 actuaries, released yesterday a public policy position statement calling on policymakers to address Social Security’s long-term financial problems. The actuaries recommended that policymakers start by increasing Social Security’s retirement age. At the heart of the recommendation was the principle that this demographic problem demands a demographic solution.
For two decades Social Security’s trustees have reported that Social Security is not in actuarial balance. Translation: absent corrective legislation, in the foreseeable future, Social Security will not be able to pay timely benefits in full. Current intermediate projections show the program’s cash flow moving into the red in 2017, and the trust fund being exhausted by 2041. A misconception is that the program’s financial woes are linked entirely to the baby boom. In fact, long after the baby boomers have departed, Social Security’s income will cover only about 75 percent of its costs. This permanent imbalance is partially attributable to increased longevity. In 1940, 65-year-old males lived on average 11.9 additional years and 65-year-old females lived on average 13.4 additional years. In 2007 those figures soared to an estimated 16.7 and 19.2 years, respectively. Projections show life expectancy continuing to rise even higher. Social Security’s normal retirement age was increased only once in the program’s history, but life expectancy continues to increase. Another increase in the retirement age is needed to ensure the viability of the program, and the time to make a change is now.
A new president will take office in 2009. This presents a politically opportune moment to address Social Security’s long-tern financial imbalance. Acting sooner will allow more of the population to be factored into the solution, and the changes to be less precipitous. It will allow Americans more time to adequately plan for retirement and provide policymakers with the largest number of available reform options. The actuaries believe that raising the retirement age should be at the top of that list.
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