Raise Retirement Age and More Become Disabled

Raise Retirement Age and More Become Disabled

Printer-friendly version
a a
Type Size: Small

Most people are working and living longer, so it seems like a no-brainer to raise the retirement age to help close the long-term Social Security funding gap. But the move could backfire and not save as much as predicted. Why? Not all groups are able to work longer, a new report from the Government Accountability Office says.

“Raising the retirement ages would likely increase the number of workers applying for and receiving disability insurance benefits,” which also comes out of Social Security, said the report, which was prepared for Sen. Herb Kohl (D-WI), chairman of the Select Committee on Aging.

The report presented a sobering view of the health status of near-retirement age population. About a quarter of Americans aged 60-61 have a work-limiting health condition, according to the report, and about two-thirds the ones who are still on the job report working in occupations that are “physically demanding.”

Raising either the early or full retirement ages above where they are now would incentivize many more of those workers to seek disability coverage in order to preserve their higher payouts later on, the report suggested.

Two academic studies cited in the report said the last time the government raised the retirement age – full retirement was lifted to 67 from 65 by Congress after receiving the 1983 Greenspan Commission report – had a similar effect. It has already “led to more disability applications,” the report said.

The report confirms that fewer Americans are working physically-demanding jobs these days. That number fell from 57 to 46 percent between 1971 and 2006. Over the same period, life expectancy at age 65 jumped 3.3 years to 18.5 years.

But not all groups benefited equally from advancing health and cushier jobs. African-American males improved just 2.6 years compared to 4.0 years for white males, for instance.

The report took a snapshot of those on the cusp of retirement, and found those reporting good or excellent health were twice as likely to have some college education, twice as likely to be working full-time, had twice the income and four times the wealth of those reporting poor or fair health. In other words, people who are the most dependent on Social Security for retirement income are the ones most likely to go on disability if denied early retirement benefits.

While raising the full retirement age would still save the system money, “raising the early retirement age would have a negative impact on (Social Security) solvency because disability costs would rise and expected total lifetime retirement benefits would not change,” the report concluded.

Click here to visit the GoozNews home page. 

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.