The original architects of retirement policy didn’t count on one thing: we are living a lot longer than our elders. In response, both corporate and local government pension plans, as well as the Social Security Administration, have focused on uniformly pushing back the age that a person can retire and receive full benefits. Currently, for people born after 1960, the full benefit age for collecting Social Security is 67 years old. But raising the age, while it might help the overall picture, would have negative consequences for some individuals.
A recent paper by economists at the Center for Retirement Research points out that since people with lower socioeconomic status haven’t experienced as great an increase in longevity, upping the full benefit age isn’t fair to them, since they will enjoy fewer years of retirement and collect less in benefits. They note that this “mortality inequality” increased from 1979 to 2011 (the last year data was collected for paper) and caution that treating all workers the same will create inequalities in retirement.
While seemingly more fair to groups with shorter life spans, adjusting benefits to take longevity into account cuts both ways. Consider the case of women, who tend to live longer than men. For people who make it to 65, men on average live to age 83, while women make it to about 85½, according to the CDC’s analysis of 2012 data (although this gap is slowly narrowing as men see more health improvements). By that math, women should have to wait until 69½ to collect benefits while men collect at 67.
In fact, in many countries policies are skewed in the other direction, with women becoming eligible for benefits earlier than men, perhaps as a legacy of a time when they were not expected to work as much and almost certainly made less money. In the U.K., for example, the retirement age for women is 2 years and 8 months earlier than it is for men, although its going to be equalized by 2018.
While some have suggested that the full retirement age should be raised for high-earning workers and lowered for lower earners, such longevity adjustments would present some ethical dilemmas. As a report from the National Center for Public Policy points out, what if a high-earning worker had a known health problem and was expected to die earlier than his demographic data would suggest? It would be hard to justify denying that worker benefits at the same age as his healthier but lower-income counterparts.
Regardless of what policy makers in Washington decide, the debate over the mortality gap is a strong reminder that as long as women are living longer, we must take additional steps to ensure our retirement security—whether that means doing our own calibrations to add a year or two to a planned retirement date or, even if we retire at age 65 or 67, making sure to have adequate sources of income into our 70s, 80s, and beyond. The Social Security Administration may not make official longevity adjustments, but we’ll still need to.