Understanding Who Would Be Affected by Raising Retirement Age

According to the Center on Budget and Policy Priorities, raising the full retirement age effectively cuts benefits for all future retirees, a change that impacts specific demographics more than others. Understanding who would be affected by raising retirement age is crucial for grasping the policy's comprehensive social and economic implications.

Quick Summary

A proposal to raise the retirement age disproportionately impacts low-income workers, individuals with physically demanding jobs, women and caregivers, and younger generations like millennials and Gen Z, while also introducing complexities for the economy and social welfare programs.

Key Points

• Low-Income Workers: Raising the retirement age disproportionately impacts low-income workers who often have shorter life expectancies and fewer retirement savings, increasing their risk of poverty.

• Manual Laborers: Individuals in physically strenuous jobs face higher health risks and reduced quality of life by being forced to work longer, as their bodies experience more wear and tear.

• Women and Caregivers: Women, especially those who take time off for caregiving, see a greater negative impact on their lifetime earnings and, consequently, their Social Security benefits.

• Younger Generations: Millennials and Gen Z must prepare to work longer and may receive lower benefits than previous generations, adding to existing financial burdens like student debt and housing costs.

• Economic Impact: The policy can strain other social programs, affect the labor market by blocking younger workers' entry, and potentially increase national healthcare costs due to declining health among older workers.

• Benefit Reduction: Raising the full retirement age effectively reduces benefits for all future retirees, with some groups feeling the loss more acutely than others, highlighting the policy's inequitable nature.

The Disproportionate Impact on Low-Income Workers and Manual Laborers

One of the most significant consequences of raising the retirement age falls on low-income workers and those in physically demanding professions. Studies show that the life expectancy gap between high- and low-income individuals has grown, meaning those with lower incomes often don't live as long and may have fewer years to collect benefits. For these individuals, a delayed retirement means fewer years of receiving a benefit they may desperately need.

• Higher Physical Burden: Manual laborers, including construction workers, factory workers, and farm workers, often experience higher rates of wear-and-tear on their bodies. Extending their working life by even a few years can significantly increase health issues and reduce their quality of life in retirement.
• Limited Savings: Low-income workers are less likely to have substantial personal savings or pensions to supplement Social Security. This makes them more reliant on these benefits, and any reduction or delay can have a more severe financial impact on their retirement security.
• Greater Financial Vulnerability: For this group, a delayed retirement age can force a difficult choice: work longer, often in declining health, or claim early at a permanently reduced monthly benefit, potentially leading to poverty.

Effects on Women and Caregivers

Women often face unique challenges in retirement planning, which are exacerbated by an increase in the retirement age. Women are more likely to spend time out of the workforce for caregiving responsibilities, impacting their lifetime earnings and, subsequently, their Social Security benefits.

• Caregiving Penalties: Many women spend years caring for children or aging family members, which can reduce their total work years and lower their overall Social Security earnings. Raising the retirement age effectively penalizes them further by delaying the age they can collect the benefits they've earned.
• Increased Health Risks: Research has found that increasing the retirement age can negatively impact the health of women, with higher rates of mental health diagnoses like depression and anxiety.
• Widow(er) Benefits: For surviving spouses, an increased retirement age can also mean a reduction in benefits, although provisions are in place to mitigate the most severe cuts for some.

The Ripple Effect on Younger Generations (Millennials and Gen Z)

While older workers face the immediate consequences, younger generations will bear the long-term burden of a raised retirement age. Millennials and Gen Z are already dealing with high student loan debt, rising housing costs, and slower wage growth. A delayed retirement age adds another layer of financial uncertainty.

• Increased Planning Urgency: Younger generations will need to plan for longer working lives and potential benefit cuts. This requires starting to save more aggressively at a younger age, which is challenging given their existing financial pressures.
• Heavier Tax Burden: As the population ages and a larger proportion of people are in retirement, the working population (millennials and Gen Z) may face a higher tax burden to sustain the system, especially if it is not made sustainable through other means.
• Erosion of the "American Dream": Many younger workers feel that the goal of retiring comfortably is slipping further out of reach. Facing the prospect of working into their 70s can be disheartening and has been a topic of concern on social media and in economic analyses.

Comparison of Impacts by Demographic Group

Demographic Group	Primary Impact	Secondary Impact	Risk Factor	Mitigation Strategies
Low-Income Workers	Delayed and reduced benefits	Increased health issues from prolonged manual labor	Higher risk of old-age poverty	Complementary policies to address low life expectancy
Manual Laborers	Higher risk of physical health problems due to longer working life	Fewer years to enjoy healthy retirement	Forced early retirement due to physical inability	Disability program eligibility and reform
Women & Caregivers	Reduced lifetime benefits due to time out of the workforce	Strain on mental health and finances from extended caregiving	Wage penalties, lower overall retirement income	Strengthened support for caregivers, equitable pay
Younger Generations	Need to work longer, face lower benefits in the future	Higher tax burden to support aging population	Increased economic anxiety, lower long-term security	Aggressive personal savings and investment strategies

Economic and Social Ramifications

Raising the retirement age is not just an individual issue; it has broader economic and social consequences. It affects the labor market, government spending, and public health.

• Strain on Social Programs: While proponents argue it can strengthen Social Security, critics point out it can increase reliance on other programs, such as disability benefits, for those unable to work longer.
• Impact on the Labor Market: Keeping older workers in the workforce longer could potentially limit job opportunities for younger entrants, creating a bottleneck in career progression. Alternatively, some older workers might choose early retirement anyway, accepting the benefit cut, leaving the job market unaffected.
• Public Health Concerns: Studies show a connection between delayed retirement and negative health outcomes, including a rise in certain health diagnoses. This could increase overall healthcare costs, offsetting some of the financial savings from Social Security. The impact is not uniform; healthier, wealthier individuals may adapt more easily, while others face greater challenges.

Conclusion: A Complex Policy with Uneven Consequences

In summary, raising the retirement age is a policy with complex and uneven effects across different segments of the population. While it may appear to offer a solution to funding shortfalls in retirement programs, it effectively functions as a benefit cut that penalizes those with shorter life expectancies, physically demanding jobs, and lower lifetime earnings the most. Women and caregivers, in particular, face additional headwinds due to historical wage gaps and unpaid labor. Meanwhile, younger generations inherit a system that requires them to work longer for potentially fewer benefits, putting immense pressure on their financial futures. As policymakers consider such changes, it is essential to recognize and address the disproportionate burdens placed on these vulnerable groups to ensure a more equitable outcome for everyone.

For additional resources on planning for a longer working life, you can visit the Social Security Administration website.

Frequently Asked Questions

What is the primary effect of raising the retirement age?

The primary effect is a reduction in lifetime benefits for new retirees, as they will receive benefits for fewer years. This is equivalent to a benefit cut, especially for those with shorter life expectancies.

How does raising the retirement age affect low-income workers?

Low-income workers are disproportionately affected because they are less likely to have significant savings and often have shorter life expectancies, meaning they will receive reduced benefits for a shorter period and are more dependent on Social Security.

Why are manual laborers heavily impacted by a higher retirement age?

Manual laborers are heavily impacted because their jobs are physically demanding, increasing the risk of health problems later in life. A higher retirement age can force them to work longer in poor health or retire early with a reduced benefit.

What impact does a higher retirement age have on women?

Women are often more affected due to time taken out of the workforce for caregiving, which lowers their lifetime earnings. A higher retirement age further delays their ability to collect benefits and can increase health issues related to prolonged work.

Will raising the retirement age affect millennials and Gen Z?

Yes, younger generations will have to work longer and are likely to receive lower Social Security benefits compared to current retirees. This adds to the financial challenges they already face, such as debt and high living costs.

Does raising the retirement age help secure Social Security funds?

While it is proposed as a way to address Social Security shortfalls, critics argue that it is a benefit cut that unfairly impacts vulnerable populations. Alternative solutions, such as raising the payroll tax cap for high earners, are also suggested.

Are all racial and ethnic groups affected equally by raising the retirement age?

No, studies show that because of differences in life expectancy and lifetime earnings, minority workers are often disproportionately affected. For example, Black men with less education can face larger reductions in expected lifetime benefits.