Why raising the Social Security retirement age really does hurt the poor the most

On Wednesday, I wrote about why raising the Social Security retirement age is a particularly cruel policy to people who hate their jobs and die young — a group that tends to be poor.

On Twitter, the very smart Marc Goldwein, who works for the Committee for a Responsible Federal Budget, took issue with the piece. Twitter is good for a lot of things, but debating the distributional impacts of changes to Social Security isn’t one of them. So let’s move the debate here.

In case you don’t want to read the rest of this, here’s the short version of my response: a Social Security check means something very different to someone with no retirement savings than it does to someone with hefty retirement savings. Cutting 11 percent of the check someone lives on and 11 percent of the check someone barely notices are not the same thing. And, finally, cutting 11 percent of the check of someone who loves his job is very different from cutting 11 percent of the check of someone who desperately wants to retire.

Goldwein’s tweet uses a table from the Social Security administration showing that the cut lops a roughly equal percentage off the benefits of people at all income levels — and of course it does; raising the retirement age is an across-the-board cut. But a 6.5 percent cut to Social Security benefits for someone with no other income is much more harmful than an identical cut for someone with $100,000 a year in income from retirement savings.

This debate is complicated a bit by the fact that there are actually two “retirement ages” for Social Security: the early retirement age, which is the earliest age at which someone can begin receiving benefits, and the full retirement age, at which Social Security grants “full” benefits (though, confusingly, you can get still larger Social Security checks by retiring later than the full retirement age). Some proposals raise only the early retirement age, some raise only the full retirement age, and some, like Chris Christie’s plan, raise both. But the Congressional Budget Office finds that increasing either retirement age — or both retirement ages — hurts the poor more than the rich.

Here’s what it says about raising the early retirement age:

If the age increased, people with lower earnings would tend to experience a greater percentage reduction in living standards than would people with higher earnings. That difference would arise in part because, relative to people with higher earnings, people with lower earnings tend to have fewer assets, to have shorter lifespans, to have less in retirement savings and private pension benefits, and to be less likely to have health insurance through former employers ... Some people could stay out of poverty by continuing to work, although that would be more difficult for people with physically demanding jobs.

Here’s what it says about raising the full retirement age:

The increase in the FRA would be particularly burdensome for people with low income, who tend to rely heavily on Social Security benefits, and especially for those who could neither qualify for [disability insurance] nor adjust their work patterns.

In both cases, the basic effect is the same: raising the retirement age is manageable so long as you can continue working, and want to continue working. But it’s a much bigger problem if you can’t continue working, or you desperately want to stop working, and were going to rely on Social Security to support you in retirement.

Which is to say, raising the retirement age is a cut that targets people who hate their jobs and want to retire, but can’t do so without Social Security.

And then there’s the fact that the poor live shorter lives than the rich. If we raised the early retirement age from 62 to 65, then someone who lives until 80 would see their 18 years of retirement cut to 15 years — a loss of about 16 percent of their retirement. Someone who only lives until 73, however, would see their retirement cut from 11 years to eight — a loss of about 27 percent of their time in retirement.

This speaks, by the way, to one of the main justifications given for raising the retirement age: that Americans are living longer lives these days. But as this chart from the Peter G. Peterson Foundation shows, the recent increase in life expectancy has been much larger among the affluent.

This is where we get into questions not of budget but of values: I think in a country as rich as ours, it should be possible for people who hate their jobs to retire relatively young, so they can spend a good portion of their adult life in retirement. I think it’s easy for people who love their jobs to underestimate how soul-crushing it is to hate going into work every day. And so I prefer fixes to Social Security that don’t force people who hate their jobs to spend longer in the workforce.

Perhaps that would change if we didn’t have other options for closing Social Security’s shortfall — but there are so, so many other paths that it baffles me why so many in Washington have fixated on this one.