Social Security has long been a bedrock of economic security for American workers and their families, helping them stay afloat when a breadwinner can no longer work because of old age, disability, or death. Today, some 240 million Americans ages 20 and older are insured under the program.
The benefits that Social Security provides are modest—the typical retired worker receives just $16,140 each year, not far above the federal poverty line. But these benefits are vital to Americans’ retirement security. More than half of seniors rely on Social Security for all or most of their income, and the program protects more than 16 million elderly Americans from poverty each year.
Growing life expectancy gap shrinks lifetime Social Security benefits for low-income workers
Social Security’s benefit structure is progressive—that is, benefits replace a greater share of wages for lower-income workers, in part because they contribute a larger portion of their earnings in payroll taxes during their working years. Yet when viewed across beneficiaries’ lifetimes, the program’s progressivity has been deteriorating due to the widening gap in life expectancy between rich and poor Americans.
While conventional wisdom dictates that everyone is living much longer than in previous decades, a growing body of research reveals that this is not the case. Rather, longevity is strongly tied to income. The latest study highlighting this disturbing trend was published last month in the Journal of the American Medical Association. Economist Raj Chetty and his colleagues examined the relationship between income and life expectancy and associated factors—such as health behaviors and access to medical care—across different geographic areas. Observing household income from 1.4 billion tax records between 1999 and 2014, the researchers uncovered a staggering 15-year gap in life expectancy between America’s richest and poorest men and a 10-year gap between the richest and poorest women. And while life expectancy grew more than two years for high earners of all genders during this period, average life spans for poor Americans barely budged.
While eye-opening, these findings are just the latest in a long line of research—dating back to the groundbreaking 1973 Kitagawa-Hauser study—documenting the growing life expectancy gap between well-to-do and lower-income people. A 2016 Brookings Institution study, for example, found that among the bottom decile of male earners, average life span rose just 1.7 years over the course of 30 years, compared with a gain of 8.7 years for the top decile of male earners.
The widening life expectancy gap has significant consequences when it comes to Social Security. Since the wealthiest tend to live longer, lower-income earners, on average, receive much less in Social Security benefits over their lifetimes. In fact, recent Government Accountability Office analysis found that shorter life spans reduced projected lifetime benefits for lower-income earners as much as 11 percent to 14 percent relative to the average.
Meanwhile, for higher-income beneficiaries, longer life spans result in an increase in lifetime benefits of 16 percent to 18 percent. For example, a male beneficiary at the 10th percentile of the income distribution can expect to live fewer than 10 years after reaching full retirement age, while a male beneficiary at the 90th percentile can expect to live more than 18 years.
Raising the retirement age further would compound the problem
Nonetheless, calls to raise the Social Security retirement age continue to dominate conservative policy platforms. Often forgotten in conversations about Social Security policy is the fact that the retirement age is already rising. In the past, the full retirement age was 65 years, but it has been gradually raised to 66 years for those born between 1943 and 1954 and to 67 years for those born in 1960 or later.
As evidence documenting the life expectancy gap continues to mount, it has become increasingly clear that raising the retirement age any further is unjust and harsh. It would amount to across-the-board benefit cuts for future generations of retirees, as Social Security’s benefit formula penalizes workers for every month they claim benefits before the delayed retirement age, which is currently set at 70 years.
While raising the retirement age would reduce benefits for all future beneficiaries, lower-income workers would bear the brunt of these cuts. Lower-income workers are more likely to work in physically demanding jobs that can cause the body to wear out early. Thus, they are more likely to need to claim Social Security benefits before the full retirement age—and consequently, to receive a smaller monthly benefit. This benefit reduction gets steeper the higher the full retirement age rises and the earlier a worker claims benefits. The greater need to claim early, coupled with significantly shorter life spans, means that shifting the full retirement age upward disproportionately hurts lower-income workers and their families.
Even more out of touch—and mean-spirited—are conservative calls to raise the early retirement age. While the full retirement age has been gradually increasing, retired workers can still claim Social Security at age 62—though they face a substantial benefit reduction if they do. Raising the early retirement age—to 64 years, for example, as some conservatives have proposed—would shorten the total period over which workers—particularly lower-income workers—can access the benefits they have earned. It would move critical retirement benefits out of reach for older workers who need to retire in their early 60s for health, family, or economic reasons. And for all the hardship it would cause, it would do little to shore up the program’s long-term financial health. While policymakers should take steps to combat the barriers that older workers face to staying in the labor market, such as expanding access to retraining opportunities and mitigating age discrimination, raising the early retirement age would be a needless blow to low-income workers’ economic security in old age.
Conclusion
Social Security will play an even more significant role for future generations of retirees as an increasingly large share of Americans risks falling short of financial security in retirement. Lower-income Americans are the least likely to be economically prepared for retirement: Only 8 percent of those in the bottom one-fifth of the family income distribution ages 32 to 61 have any retirement savings at all compared with 88 percent among the top one-fifth.
As inequality has risen and economic mobility has fallen, being born in poverty increasingly means being stuck in poverty, robbing Americans of years—or even more than a decade—of life. As the gap in life expectancy between the richest and poorest Americans continues to widen, now is the time to expand and strengthen Social Security, not cut it.
Rebecca Vallas is the Managing Director for the Poverty to Prosperity Program at the Center for American Progress. Jackie Odum is a Research Associate and Rachel West is an Associate Director for the Poverty to Prosperity Program at the Center.