Throughout most of human history, retirement had no meaning. Given the shorter life spans of earlier eras, most people worked until they no longer could or until they died. Those unable to work had few options other than to turn to family or charity. If one had no family, among the few options were alms houses and mental institutions. The only exceptions were the wealthy. Only recently have the latter years of life come to be referred to as “golden.”
The situation began to improve during the 20th century as life spans increased and retirement became more common. Yet the new life course stage of retirement introduced problems. As life expectancy increased, the number of working-age adults relative to the number of retirement-age individuals decreased. In 2020 there were 3.5 working-age adults for every individual over 65. By 2060 that ratio will drop to 2.5.
This raises critical questions related to the support of a continuously growing retired population. As employers face a shortage of high-skill employees, forcing workers to retire makes no sense. If their health is good, those who have demonstrated their willingness to work should have a place.
Take, for example, the 5,000 pilots who will be forced to retire when they reach 65 during the next two years, a number that will almost triple by 2026. An employer such as Southwest Airlines lost 1,000 pilots between 2019 and 2021 and may consider hiring foreign national pilots to fill the gap, an option that unions oppose.
A major imperative is to maintain a robust labor force at a time when long-term, and even midterm, Social Security solvency remains in question. Our work shows that low-income workers, minorities and a growing population of poorly educated immigrant workers would be seriously affected given the fact that Social Security benefits constitute a larger proportion of their retirement income than for higher paid workers.
All else being equal, giving people incentives to work will increase individual welfare and help address the fiscal problems of the system. Retirement security, of course, means more than income. Long-term care is increasingly part of the life cycle, and its costs are rising as people live longer. Our recent research confirms that reasonably priced assistance is essential for individuals with dementias and other limitations. If current trends continue, more than 9 million Americans across the nation will need dementia care by 2030, and nearly 12 million by 2040.
We must also remember that Social Security affects reciprocity between the young and the old and the “haves” and the “have nots.” Health and social policy must address the issue of the solvency of health and retirement programs with this in mind. For a large fraction of the U.S. population, the final years of life are anything but golden.
Certain lawmakers propose raising the full retirement age from 67 to 70. Although this would increase payroll contributions for those who can continue to work, it would pose hardships for those who cannot.
Another proposal is to increase the age of eligibility for Medicare from 65 to 67 and introduce higher premiums. The time between 65 and 67 is a period of high risk of chronic illness and its complications that, if left untreated, will become more expensive later.
Other options include changing the formula for cost-of-living adjustments to reduce their size, removing the cap on payroll taxes for high earners, and at the extreme, privatization of the program, which would make individuals responsible for their own retirement savings.
All of these proposals face political hurdles. Most importantly, they could be perceived as unfair and undermine the support and sense of solidarity that gives legitimacy to the current system. Clearly, sustainability of Social Security is vital to everyone.
Jacqueline L. Angel is a professor in the LBJ School of Public Affairs at The University of Texas at Austin.
Fernando Torres-Gil is a professor of social work and public policy at the University of California, Los Angeles.