Raising the Retirement Age: A Reflection of Our Evolving Economy

Fiscal realities and the way we work have changed the way Washington looks at retirement.


When the congressional supercommittee charged with cutting trillions from the U.S. budget prepares meets this fall, all areas of the federal budget will be on the table. A thing like defense spending, which was once considered sacrosanct, is now on the chopping block.

Only some Americans—members of the military and those who work in the defense industry—will feel the pinch when defense spending is cut. However, there is one proposal on the table that will affect all Americans, not just now, but for generations: an increase in the retirement age.

[See 8 New Rules of Retirement.]

Changing the retirement age—currently 66 years—once ranked along with defense spending as the untouchable third rail of American politics. Changing the way that people retire could mean steep losses at the poll booth.

But the fiscal reality of the last decade changed the way Washington looks at retirement. Politicians have recognized that spending on Social Security, or the money one receives from the government after retirement, and Medicaid, the program that provides health services to retirees, is not sustainable. According to the Senate Committee on Aging, increasing the retirement age would cut less than one third of the Social Security deficit. But both Democrats and Republicans now consider an increase in the retirement age on the table.

"My sons are 21 and 22; neither of them thinks Social Security is around for them. I want to make sure that it is," Democratic Senator Tom Carper of Delaware said earlier this year. "It's going to have to be a combination of very modest adjustments in benefits, very modest, and some frankly fairly modest changes with respect to revenues."

Last summer, House Majority Leader John Boehner told a Pittsburgh newspaper, "We're all living a lot longer than anyone ever expected," Boehner said in a meeting with the editors of the Pittsburgh Tribune-Review. "And I think that raising the retirement age … is a step that needs to be taken."

On this one issue, politicians are on the same page.

[See the 10 Most Difficult Retirement Decisions.]

A reflection of America's changing economy. An increase in the retirement age is also a reflection of the way Americans work. Most consider the U.S. retirement age 66, but workers can start collecting benefits at 62.

The retirement age of 66 was set because of the way Americans worked over the 20th century. The American economy was built on the backs of blue-collar workers, whose bodies wouldn't allow continued strenuous work as they lived into their 60s. Age 65 was chosen in the 1930s based on actuarial studies of sustainablity and the historical precedent of state retirement programs.

"There are certain jobs that don't lend themselves into their late 60s," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "With manual labor and backbreaking work, it made less sense to think about living longer. The kind of jobs that don't take a toll on your body."

However, the way Americans work has changed. Many of the manufacturing jobs that used to reside in Detroit or Cleveland were shipped overseas in the 1970s and 1980s. Americans now do work that is less physically demanding but more mentally taxing.

Because of this, Americans are living longer. According to a U.S. Senate report, the life expectancy of U.S. citizens was 70 in 1969. Now, the average American can expect to live to 77.

[See Why Your Retirement May Not Be Permanent.]

Changes to retirement age gradual but steady. Under proposals being considered in Washington, changes to the retirement age are gradual and will come over the next decades, not years.

The most popular plan with politicians for raising the retirement age is one drafted by former White House Chief of Staff Erskine Bowles and former Senator Alan Simpson, a Republican from Wyoming. Under the so-called Bowles-Simpson plan, the retirement age would be 68 by 2050 and 69 by 2075. If this plan were to be adopted, only those born after 1982 would be affected.