If you know anything about Social Security you have bumped into the term “full retirement age” — now 67 for people my age. It’s time to get rid of it.
For one thing, monthly Social Security benefits continue to increase up to age 70 if workers delay taking them, in effect delivering a risk-free rate of return on retirement money that beats what’s available in the market.
For another, there’s the simple reality that people live longer than they used to. People today retiring at age 70 can expect more years ahead of them than 65-year-olds could back in 1940, when Social Security was new.
But maybe the biggest problem is that full retirement age only encourages people to see the point of a working life as stumbling across a finish line at the end and then putting up their feet. There seem to be better ways to think about work, retirement and the arc of a good life.
Twin Cities economist Timothy Taylor doesn’t think there’s one correct retirement age, but if asked to pick one he likely would land on 70. It’s what he called the “conceptually accurate” retirement age that’s baked into the Social Security program.
“We all sort of know people are living longer. We all know there’s more people living into their 90s or even their 100s,” Taylor said. “But we’re still living, at least a lot of people, like ‘I’ll retire at 60.’ And that’s just a hard thing.”
This is one of the points Taylor found interesting in some recent research on retirement and aging that he later summarized into one article on his economics blog, called the Conversable Economist.
Part of what clearly bugs Taylor is that most things people might read about retirement, at least those of us forced to run our own do-it-yourself retirement savings project with a 401(k) or IRA, seem to reinforce the idea that it’s best to retire as early as possible. But there are lot of hard-to-anticipate things that can happen between someone’s last day on the job and their last day on earth.
The idea of basically dumping the term full retirement age is one Taylor highlighted from economists Martin Baily and Benjamin Harris, as the term poorly frames the whole idea of retirement. If this term survives at all, please make it age 70.
Another idea is to make 70 a new mandatory retirement age, not for the benefit of a 70-year-old who might need a break from work but to encourage employers to hire 60-somethings.
This one came from Alicia Munnell and Abigail Walters from the Center for Retirement Research at Boston College, who noted how employers might fear that older workers would hang on to jobs into their 70s and end up costing more and more in health benefits.
One of the reasons why planning for retirement has proved to be so stressful for people comes from an observation Taylor repeated in his blog that had been made by economists Robert Clark and John Shoven.
In saving for retirement, these two suggested, most of us are trying to do something that’s nearly impossible: Work 40 years to get enough money to pay for 30 years of living well in retirement.
It’s not just people with a DIY retirement savings plan who have worries, as longer lives also help explain why there are a lot of Americans in pension plans that now look underfunded.
Some 70-year-olds are still working because they see no practical choice, but one of the things Taylor said he liked about all three papers he just wrote about on his blog is that none of the authors insisted there was a “correct” retirement age. It’s a personal decision, although landing on a date or how much savings might be enough are very difficult for a person to figure out on their own.
One idea from economics is that it’s the big decisions in life that are most easily bungled, because people have no experience with them. Unlike where to go for a good pizza, Taylor’s example of a choice that’s easy to get right, the decision on when to retire isn’t one folks get to redo 50 times until they know exactly what’s best.
One argument for sticking around at work longer is that a lot of us work in occupations where it’s impractical to try out retirement. Making a phone call one year into retirement isn’t likely to get an old job back.
“A lot of people are still living in a world where life expectancy was mid-70s,” Taylor said. “There’s really another decade there on the end, and for a lot of people it’s a pretty good, healthy, active, strong decade.”
It’s easy to understand why people claim Social Security benefits when first eligible in their early 60s, as they fear they might not be around at age 66 or 70 to collect a bigger monthly check. Maybe instead of grabbing Social Security, folks could give themselves a little early reward by taking a short break from work well before retirement, Taylor said. Think of it as a form of sabbatical like ministers and university professors get, even though something like that might be unheard of in many fields.
Maybe the opportunity comes from accepting a new job and then asking for a later start date to enjoy a month or two at the lake. Then just push back the planned retirement date a little.
“Feeling like it all has to happen between 62 and 69 because after that you’re going to be too old to go anywhere,” Taylor said, “well that’s pretty 1940s in the thinking.”