it’s about time: raising the retirement age for social security · 2012-05-17 · (nra) – i.e.,...

Copyright © 2008 by the American Academy of ActuariesSeptember 2008

ItIt’’s About Time: Raising the s About Time: Raising the Retirement Age for Social SecurityRetirement Age for Social Security

Bruce D. Schobel, MAAA, FSA, FCABruce D. Schobel, MAAA, FSA, FCAChairperson of the Retirement Security Principles Task Force, AmChairperson of the Retirement Security Principles Task Force, American Academy of Actuarieserican Academy of Actuaries

Thomas S. Terry, MAAA, FSA, EA, FCAThomas S. Terry, MAAA, FSA, EA, FCAVice President & Chairperson of the Pension Practice Council, AVice President & Chairperson of the Pension Practice Council, American Academy of Actuariesmerican Academy of Actuaries

September 5, 2008 September 5, 2008


Actuarial ImbalanceActuarial Imbalance

Social Security Income and Outgo

0

5

10

15

20

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Calendar Year

% o

f tax

able

pay

roll

IncomeOutgo

Greater Life Spans

78% of outgo in 2041

Baby Boom

2017

2008 Table IV.B1. Social Security Trustees Report - Intermediate Assumptionshttp://www.ssa.gov/OACT/TR/TR08/lr4b1.html


Increasing LongevityIncreasing Longevity

Source: 2008 OASDI Trustees Report. The period life expectancy at a given age for a given year represents the average number of years of life remaining if a group of persons at that age were to experience the mortality rates for that year over the course of their remaining lives; 2005 to 2007 are estimated

Increased Longevity at 65

02468

1012141618202224

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Year

Add

itona

l yea

rs li

ved

MalesFemales

Actual Projected


Social SecuritySocial Security’’s Retirement Age Should Be s Retirement Age Should Be RaisedRaised

Demographic problems require demographic solutions

Social Security must accommodate future increases in longevity

Retirement age only increased once in Social Security’s history despite continued increases in average life expectancy

Increasing retirement age can significantly help restore program to actuarial balance


Social Security Normal Retirement AgeSocial Security Normal Retirement Age

Social Security Normal Retirement Age

6464.5

6565.5

6666.5

6767.5

6868.5

6969.5

70

1936

1941

1946

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

2011

2016

2021

2026

2031

Year of Birth

Nor

mal

Ret

irem

ent A

ge


Raising the Retirement AgeRaising the Retirement Age

Three sample proposals 1) Eliminate the hiatus in the normal retirement age (NRA) – i.e., speed up the increase to age 67

2) Eliminate the hiatus in the NRA – i.e., speed up the increase to age 67 – and then increase it by 1 month every 2 years until it reaches age 70

3) Keep the current schedule of NRA increases to age 67 but continue increasing it thereafter by 2 months every year until it reaches age 70


Proposal 1Proposal 1

Social Security Normal Retirement Age and Proposal 1

6464.5

6565.5

6666.5

6767.5

6868.5

6969.5

70

1936

1941

1946

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

2011

2016

2021

2026

2031

Year of Birth

Nor

mal

Ret

irem

ent A

ge



[1] Under the intermediate assumptions of the 2008 OASDI Trustees Report, Social Security’s long-range (75-year) actuarial deficit is 1.70 percent of taxable payroll.

Keep the current schedule of NRA increases to age 67 but continue increasing it thereafter by 2 months every year until it reaches age 70

Eliminate the hiatus in the NRA – i.e., speed up the increase to age 67 – and then increase it by 1 month every 2 years until it reaches age 70

10%Eliminate the hiatus in the normal retirement age (NRA) – i.e., speed up the increase to age 67

Approximate percentage of Social Security’s long-range deficit[1] eliminated

Sample proposal




6464.5

6565.5

6666.5

6767.5

6868.5

6969.5

70

1936

1941

1946

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

2011

2016

2021

2026

2031

Year of Birth

Nor

mal

Ret

irem

ent A

ge




Keep the current schedule of NRA increases to age 67 but continue increasing it thereafter by 2 months every year until it reaches age 70

35%Eliminate the hiatus in the NRA – i.e., speed up the increase to age 67 – and then increase it by 1 month every 2 years until it reaches age 70



Sample proposal




6464.5

6565.5

6666.5

6767.5

6868.5

6969.5

70

1936

1941

1946

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

2011

2016

2021

2026

2031

Year of Birth

Nor

mal

Ret

irem

ent A

ge




50%Keep the current schedule of NRA increases to age 67 but continue increasing it thereafter by 2 months every year until it reaches age 70

35%Eliminate the hiatus in the NRA – i.e., speed up the increase to age 67 – and then increase it by 1 month every 2 years until it reaches age 70



Sample proposal


All Three Sample ProposalsAll Three Sample Proposals

Social Security Normal Retirement Age and All 3 Proposals

6464.5

6565.5

6666.5

6767.5

6868.5

6969.5

70

1936

1941

1946

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

2011

2016

2021

2026

2031

Year of Birth

Nor

mal

Ret

irem

ent A

ge


Labor Force Participation RatesLabor Force Participation Rates


Social SecuritySocial Security’’s Problems Should Be s Problems Should Be Addressed NowAddressed Now

More policy options can be applied to more of the population

Tax increases could be phased in more gradually; benefit reductions could be smaller and less precipitous

Allow more time for individuals to plan accordingly


Questions?Questions?

Questions?

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it’s about time: raising the retirement age for social security · 2012-05-17 · (nra) – i.e.,...

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