PAUL SOLMAN: How many of you are expecting when you retire to get some Social Security benefits?
A student poll we took recently at Boston’s Bunker Hill Community College.
Any of you expecting to get no Social Security benefits? One, two, three, four people who don’t even think they’re going to get any Social Security benefits.
In their mid-20s, on average, almost all the students here work and pay into the Social Security system, in which they don’t seem to have the greatest confidence.
STUDENT: As I see it, it’s going to be broke, totally broke.
PAUL SOLMAN: Let me ask one more question. How many of you think you will get as much money in retirement as I’m going to get? How many of you think you’re going to get less than I get? Everybody. So that’s the context —
Context, that is, for economist Alicia Munnell, an expert on retirement issues, whom we’d brought to this class to explain one of the proposed changes in Social Security benefits: Raising the retirement age. What did she think of the students’ predictions?
ALICIA MUNNELL, Boston College: I think the notion that they’re going to get less than you is probably realistic. The idea that you’re going to get none is not very realistic.
PAUL SOLMAN: Munnell then summarized why Social Security may well pay less to these folks than to current retirees. But if they’d been listening to President Bush’s State of the Union address, they’d have heard the same thing. When Social Security was adopted in the 1930s, he explained…
PRESIDENT GEORGE W. BUSH: About 16 workers paid into the system for each person drawing benefits. In today’s world, people are living longer, and therefore drawing benefits longer, and those benefits are scheduled to rise dramatically over the next few decades.
And instead of sixteen workers paying in for every beneficiary, right now it’s only about three workers — and over the next few decades, that number will fall to just two workers per beneficiary.
PAUL SOLMAN: Retirees are living longer, and, the president might have added, fewer kids are being born and entering the work force to support retirees.
ALICIA MUNNELL: So we’re going to have a lot of people who are going to be getting benefits and fewer people who are going to be paying taxes into the program.
PAUL SOLMAN: When Social Security was enacted in 1935, the retirement age was set at 65, the prevailing age used by pension systems at the time. Back then, a man aged 65 was expected to live another dozen years till age 77, and a woman till age 79.
But today, a 65-year-old man can be expected to live another 16 years into his early 80s, and a woman to make it another 19, to age 84. That’s a huge increase. Small wonder, then, that some are proposing to raise the retirement age — beyond, that is, what’s already been done.
ALICIA MUNNELL: What we have is changes that were enacted in 1983 being phased in, so the age at which you get full benefits is moving from 65 to 67. It already is going to be 66, I think, by the time Paul retires.
PAUL SOLMAN: Right.
ALICIA MUNNELL: And then…
PAUL SOLMAN: And I’m 60 now, so I’ll be able to collect full benefits in six years.
ALICIA MUNNELL: And then it stays at 66 for a while, and then it starts moving up two months a year to 67. And there are these proposals floating around to make it 69, 70.
PAUL SOLMAN: Right now, the official retirement age is scheduled to level off at 67 in 2027. But if it were raised faster and further — say, to 71 by 2040, 75 a few decades later — the system would actually save so much money paying lower benefits, the entire Social Security shortfall would be covered.
Now, as it happens, most people retire before the official retirement age — almost half at age 62, when reduced benefits first become available.
ALICIA MUNNELL: A lot of people have very crummy jobs. And as soon as they have some money available, they want to stop working.
PAUL SOLMAN: But if the retirement age were further extended, benefits at age 62 would presumably be reduced or the age of early retirement raised from 62. In either case, you’d still get lower benefits. That said, we put the question to the students.
PAUL SOLMAN: At 2050 when you retire, should — how many people would think it was fair, okay, with them for the retirement age to be older than 67 at that point? How many people — hands up if you would? Is that because your shoulders are broken, or is that — How many people think it would not be fair?
Every hand went up. So I decided to play devil’s advocate and make the case for raising the retirement age.
You’re going to live longer. That to me means you should take full retirement benefits later. What’s wrong? What am I missing? Yeah.
STUDENT: We may be living longer, but not everybody will be healthy enough to keep on working as much as they need to, to make up for the extended years. They’re going to be more tired. They’re not going to be as energetic as they were a few years before. So if you extend that, how are we going to deal with that?
STUDENT: Right now I can work 40 hours. But later on, maybe I can only work 20 hours. I don’t know. Even if I live longer, that doesn’t mean I can work harder and longer.
PAUL SOLMAN: But wait a minute. Living longer implies living healthier longer. Social Security’s actuaries have done the longevity numbers.
ALICIA MUNNELL: And they think these guys are going to live till they’re about 87.
PAUL SOLMAN: According to Richard Suzman at the National Institutes of Health, U.S. life expectancy has been rising.
RICHARD SUZMAN: Three months a year for the last 150, 160 years.
PAUL SOLMAN: Three months a year, and it shows no signs of no signs of stopping.
RICHARD SUZMAN: Nobody knows when the trend is going to level off, and obviously there must be some point at which it levels off.
PAUL SOLMAN: For example, we haven’t yet seen the effects of molecular medicine, stem cell research, or, says Suzman, the possibility…
RICHARD SUZMAN: Of finding mechanisms to slow the aging process.
PAUL SOLMAN: And then all bets would be off.
RICHARD SUZMAN: And then, many, many, many bets are off.
PAUL SOLMAN: In which case, these students could expect to live well into their 90s or beyond. But maybe the perception of increased longevity is what has them worried. What if the government starts raising the age of retirement, and then raises it some more?
STUDENT: And who’s to say that they stop, that eventually it’s not when you’re 120, okay, you can collect full benefits? You know, who’s to say that it will never stop, and then they’ll, you know, just systematically phase it out, and then nobody collects Social Security?
PAUL SOLMAN: So some fear the precedent of raising the retirement age. But there was also a more basic objection: What good is living longer if you have to keep working?
STUDENT: Obviously, none of us know that, how long we can live. So we work until 62, more than 40 years. And I think that that’s the right time to stop working and begin to enjoy our life.
PAUL SOLMAN: And there, in a sound bite, is what seems to be the main problem with making up the Social Security shortfall by raising the retirement age: A seemingly inviolate notion of when the golden years begin.
ALICIA MUNNELL: But if we can get a mindset so that later retirement becomes acceptable, really later retirement, then you could possibly move the retirement age, normal retirement age, the way you want. But right now you can’t.
PAUL SOLMAN: Which may help explain why the American public has yet to embrace this and other benefit changes to Social Security as they know it.