Thinking on when to retire and receive Social Security benefits is one of the most difficult decisions a worker can make. There are no solid answers to the question of when, because life likes to throw curve balls at individuals when they least expect them, but the answer appears to be increasingly “potentially never”.
Let’s go back to 1935, when the retirement age was set. It was the middle of the Great Depression, and the Social Security Act set a national retirement age of 65 as the baseline. At the time, the average life expectancy was 58 for men and 62 for women, implying that the majority of individuals would not reach retirement age.
According to labor economist Teresa Ghilarducci, there was significant opposition to a national retirement plan. Setting the age at 65, when life expectancy was far lower than it is now, was a political decision to get Social Security legislation passed.”
However, times have changed, and practically everyone reaches the age of 65, and the system is not designed to accommodate this. Nowadays, people can receive benefits for decades.
This is what caused the first collapse of the Social Security system in 1983, and one of the remedies to prevent future breakdowns was to gradually raise the full retirement age to 67. The problem is that beneficiaries can still receive as early as age 62, Medicare still begins at age 65, and Americans have internalized the previous retirement age.
All of this is to say that in less than a decade, experts predict a 23% fall in Social Security payouts as the program approaches another fiscal crisis.
Solutions to the Social Security shortfall
One of the primary remedies presented was to raise the retirement age again, which the political right supports. They feel it should be adjusted to reflect increased life expectancy and pushed back. They are supported by company owners, such as Blackrock CEO Larry Fink, who claimed that “no one should have to work longer than they want to,” while also calling the concept of sexagenarian retirement “a bit crazy.”
The concept is that if we live longer, we should not spend those extra years enjoying life or being sick and frail, but rather continuing to work in any capacity we can.
Many studies appear to support these ideas, with the Pew Research Center reporting in a December study that the number of working 65-plus-year-old Americans nearly doubled from 1987 to 2023, with better levels of job satisfaction than younger workers.
A headline that’s memorable: “The new retirement is no retirement: Baby boomers are keeping jobs well into their sixties and seventies because they ‘like going to work'” contributes to the argument.
Ghilarducci adds, “There is a lot of evidence that demonstrates that people who work in old age are healthier than persons who retire in old age. And in polls of people who have opted to continue working, they have usually done so because they are well-suited to their employment.”
However, while this rosy vision appears wholesome, the truth is quite different. The majority of persons who work past their retirement age, particularly those in blue collar industries, do so because they cannot afford to retire.
Ghilarducci explains, “This distorted notion that working longer hours makes [older individuals] healthy is neither relevant nor true for 90% of the population. According to research, retirement with sufficient money is better for practically everyone — the secretary, the health care worker, and the shop clerk.
Delaying retirement can be difficult for many older folks, especially when financial circumstances need them to continue working. MassMutual found that nearly half of retirees departed the workforce earlier than expected. Approximately one-third were compelled to retire owing to job changes.
In addition, one-quarter mentioned illness or injury as the cause for their early retirement. Caregiving duties, such as caring for a spouse with dementia or other health concerns, can contribute significantly to unplanned retirements. These considerations underscore the complicated obstacles that older persons confront when managing work, health, and caring responsibilities.
As a result, determining when to retire remains a difficult decision that is heavily influenced by personal circumstances. While deferring retirement is a good idea if possible, it is more important to focus on improving your financial situation and taking care of your health.
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