Some ‘Age’ Old Myths about Social Security
Prompted by some great comments on my other post, The Truth About Social Security, I thought it was appropriate to share some more facts about the system.
Myth: The retirement age has not changed since the system was started in the 1930′s.
Fact: While the official retirement age known as “normal retirement age” is still 65, this is only true for participants born in 1937 or before. For each year after, the normal age increases slightly until everyone born in 1960 or later that normal age is 67. Full schedule here.
Myth: Early retirees are draining the system.
Fact: One can start SS benefits at age 62, but the benefit is reduced by a formula which results in a 20% cut in benefits. Actually, the formula is 5/9 of 1% for each of the first 36 months of early retirement and 5/12 of 1% for months beyond that. So those of us born after 1960 with a normal retirement age of 67 would get just 70% at age 62.
Myth: The retirement age has not changed despite life expectancy increasing dramatically.
Fact: It is true that the life expectancy has risen from 60 in 1930 when the normal retirement age was 65 to over 78 today while the normal age is just 67. But these statistics mask the real truth. You see, life expectancy is heavily influenced by infant and child mortality. If we look at the life expectancy of those adults who reach age 65, the story is different. In 1940, you were expected to life 13 years if you reached age 65; in 1980 this figure increased to 16.9 years, just 4 years longer while the retirement age is 2 years higher. (It would be interesting to see life expectancy at 67 vs 65.)
To be fair, those reaching 65 in 1990 could expect to live another 17.5 years. Indeed, it appears life expectancy is climbing roughly half a year each decade for 65 year olds. Perhaps contributing more than life expectancy is the ratio of adults who reach age 65. In 1950 only 56.2% of men and 65.5% of women survived from age 21 to age 65. In 1990 those ratios climbed to 72.3% and 83.6%. There is no doubt these trends are contributing to the SS Fund’s shortfall, but not to the extent that the “one foot in the grave at 65″ misconception alludes to.
*All statistics are for the U.S.
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