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Social Security and the Age of Retirement

Social Security and the Age of Retirement

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Unlike a century ago, people expect their children to live past the age of retirement. This fact has important implications for how workers save for retirement, but has no specific implications for the retirement portion of Social Security. In addition, the increase in life expectancy is not nearly as important as it might first appear. A significant part of the increase in life is between birth and age 20. Including declines in child and teen mortality exaggerate the increase in retirement length. Furthermore, much of the gains in life expectancy come during working years—between age 20 and retirement. This means that workers are not only experiencing longer retirements, but longer working lives as well. Finally, each succeeding generation has been vastly more productive than prior generations—a trend that will continue. Thus, not only have workers on average more years of work over their lifetime, they are better able to save for their retirements.
Unlike a century ago, people expect their children to live past the age of retirement. This fact has important implications for how workers save for retirement, but has no specific implications for the retirement portion of Social Security. In addition, the increase in life expectancy is not nearly as important as it might first appear. A significant part of the increase in life is between birth and age 20. Including declines in child and teen mortality exaggerate the increase in retirement length. Furthermore, much of the gains in life expectancy come during working years—between age 20 and retirement. This means that workers are not only experiencing longer retirements, but longer working lives as well. Finally, each succeeding generation has been vastly more productive than prior generations—a trend that will continue. Thus, not only have workers on average more years of work over their lifetime, they are better able to save for their retirements.

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Published by: Center for Economic and Policy Research on Jun 03, 2010
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10/16/2012

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Social Security and the Age ofRetirement
 
David Rosnick
 June 2010
 
Center for Economic and Policy Research
1611 Connecticut Avenue, NW, Suite 400Washington, D.C. 20009202-293-5380www.cepr.net
 
CEPR Social Security and the Age of Retirement
i
Contents
Introduction........................................................................................................................................................1
 
Longer Retirements Require Extra Savings...................................................................................................2
 
 An Additional Year in Life Expectancy at Birth is Not the Same as an Additional Year of Retirement...........................................................................................................................................................4
 
 Alternatives to an Increase in the Retirement Age.......................................................................................7
 
Conclusion..........................................................................................................................................................8
 
 About the Author
David Rosnick is an Economist at the Center for Economic and Policy Research in Washington,DC.
 Acknowledgements
 The author thanks Dean Baker, Kris Warner, and Nicole Woo for their helpful suggestions.
 
CEPR Social Security and the Age of Retirement
1
Introduction
 The last century has seen large increases in life expectancy for both men and women. A man bornin 1899 could expect to live 51.0 years, but a man born fifty years later could expect to live to age72.9. Similarly, women born in 1899 could expect to live 57.8 years while those born a century latercould expect to live to age 84.8.Unlike a century ago, people can expect their children to live past the age of retirement. This facthas important implications for how workers save for retirement, but has no specific implications forthe retirement portion of Social Security. In addition, the increase in life expectancy is not nearly asimportant as it might first appear. A significant part of the increase in life is between birth and age20. Including declines in child and teen mortality exaggerate the increase in retirement length.Furthermore, much of the gains in life expectancy come during working years – between age 20 andretirement. This means that workers are not only experiencing longer retirements, but longer working lives as well. Finally, each succeeding generation has been vastly more productive thanprior generations – a trend that will continue. Thus, not only do workers experience, on average,more years of work over their lifetime, they are also better able to save for their retirements.

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