Spring 2015

Resetting Social Security

Authors
S. Jay Olshansky, Dana P. Goldman, and John Wallis Rowe
Abstract

Social Security retirement benefits were first introduced in 1935 as a financial safety net for a large and rapidly growing older American population. The program was intended to be economically self-sustaining, but population aging and rising life expectancies threaten the program’s solvency. The 1983 Social Security Amendments mandated that the full retirement age increase to 67 by the year 2027. In this essay, we present evidence demonstrating that the rate of improvement in life extension at older ages accelerated after 1983. If the 1935 ratio of working years to retired years is maintained, early and full retirement ages of 66.5 and 69.4, respectively, were justified in 2009. Additional delays in the age of eligibility beyond those currently in effect would place significant financial burdens on individuals with lower life expectancies, the poor and near-poor, and the very old, and – absent additional reform – would exacerbate existing unequal access to entitlements within the system.

S. JAY OLSHANSKY is Professor of Epidemiology at the School of Public Health, Division of Epidemiology and Biostatistics at the University of Illinois at Chicago. He has published articles in such journals as The New England Journal of Medicine, JAMA: The Journal of the American Medical Association, Science, The Scientist, Scientific American, and Health Affairs.

DANA P. GOLDMAN is the Leonard D. Schaeffer Chair in Health Policy at the University of Southern California. He is also the Director of the Schaeffer Center for Health Policy and Economics. He serves as a health policy adviser to the Congressional Budget Office, and his research has appeared in the New England Journal of Medicine, JAMA, Demography, the Journal of the American Statistical Association, and Health Affairs.

JOHN W. ROWE, a Fellow of the American Academy since 2005, is Professor at the Columbia University Mailman School of Public Health and Chair of the MacArthur Foundation Research Network on an Aging Society. He is the author of Successful Aging (with Robert L. Kahn, 1998) and was the Chair of the Institute of Medicine of the National Academies project the Future Health Care Workforce for Older Americans, which authored the report Retooling for an Aging America: Building the Health Care Workforce (2008).

In the future when there are a great many persons over 65, most of the able-bodied individuals will and should continue working to age 70 or 75 if their services seem needed.

–Robert J. Myers, Chief Actuary (1947–1970) and Deputy Commissioner (1981–1982) of the Social Security Administration (SSA) and leader of the National Commission on Social Security Reform (1982–1983)1

Has the time arrived to reset the age of eligibility for Social Security retirement benefits? When President Roosevelt signed the Social Security Act (SSA) in 1935 in the wake of the Great Depression, unemployment was 34 percent, savings accounts were decimated, and almost 50 percent of the older population was dependent on family and friends for financial support. There was reason to believe large segments of the population–particularly the elderly– were facing destitution.2

To address this concern, the Committee on Economic Security was established by executive order in 1934. What we know today as Social Security began simply as a federally administered social insurance retirement program for older people, nominally financed through payroll taxes and paid for by workers and their employers. As the program was originally structured by the Social Security Act of 1935, people would earn benefits as they continued to work. If death occurred before age sixty-five, or before they received what they paid into the system even after retirement, their estate would receive the difference plus interest in the form of a one-time lump-sum payment. At the program’s inception, no benefits were provided to spouses or children. .  .  .

Endnotes

  • 1Robert J. Myers, “A Comparison of Dependent and Productive Groups in Various Populations,” Actuarial Study No. 2, Office of the Actuary, Social Security Board, 1938, 18.
  • 2Martha A. McSteen, “Fifty Years of Social Security,” U.S. Social Security Administration, 2014, http://www.ssa.gov/history/50mm2.html.
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