Raising the full retirement age or cutting retirement benefits are often presented as part of the solution to fixing Social Security, but a new study from the Brookings Institution shows how those potential fixes could have long-standing unintended consequences.
Raising the retirement age “would make sense if the gains in expected life spans are enjoyed equally by rich and poor,” according to the report. “However, if life expectancy is increasing only for those at the top of the income distribution, an increase in the retirement age seems unjust for the lower income group, which have unchanged or only marginally improved life expectancy.”
And that appears to be the case. “Improvements in life expectancy have been highly unequal, and low-income workers have experienced much smaller gains in life expectancy when compared with workers further up the income scale,” according to the report.
But all recipients would be impacted. Raising the retirement age would reduce benefits across the board by 6% to 7.5%, affecting low- and high-income seniors, says Gary Burtless, an economist at Brookings and co-author of the report, titled “Later Retirement, Inequality in Old Age, and the Growing Gap in Longevity Between Rich and Poor.”
Trimming retirement benefits, however, would hurt lower income seniors more than wealthier ones because of the disparities in life expectancy, according to the report. Since lower-income seniors tend to not live as long as wealthier Americans, they would collect less in benefits over their lifetime. For wealthier Americans those cuts would be offset in part by collecting benefits for longer.