November 22, 2010

The Cost and Risks of Postponing Retirement

The GAO has issued an interesting report on the implications for increasing the retirement age. As the American workforce ages (the Insider is all over that one), and as the pressures on retirement funding increase, the various payers are all looking for ways to shift the costs to someone else. Who are the payers? Social Security, SSDI, the states, private insurers and self-insured employers. As the feds tinker with the retirement age, they are very much in the solve one problem, create another mode.

At first glance, it seems pretty simple: to reduce pressure on the social security retirement system, make people work longer. But it's one thing for a white-collar bureaucrat (or consultant!) to work into his or her late 60s, it's something else altogether for modestly educated workers with physically demanding jobs. As the feds slam the door on social security, the door on SSDI flies open. The GAO notes that about 2/3 of those who work report having a job that is physically demanding. In addition, disability rates increase with age, with the result that workers who postpone retirement face the increasing likelihood of becoming disabled. Thus the ever-aging workforce, unable to perform the physically demanding work, may be forced to apply for disability retirement - which, after all, pays better than ordinary social security.

The State of the States
This federal-level debate is taking place parallel to what is happening at the state level, where workers comp systems designed to accommodate retirement at 65 or sooner are confronted with older and older workers. How should workers comp estimate the working life of an older worker? To the degree that state systems curtail benefits of these aging workers, the pressure will build on the federal social security and SSDI systems.

One thing is certain: every payer sits in an isolated silo, doing their best to make someone else cut the checks. Every successful shift in cost creates pressure somewhere else. And at the center of this developing storm sit the aging workers themselves: not necessarily wanting to work, not necessarily wanting to qualify for disability, but suffering the slings and arrows of time, with nothing much saved for retirement and an increasingly ominous future close at hand.

| 1 Comment

1 Comment

Good article which spells out issues that never seem to enter the thoughts of the legislative bodies that say they are protecting the middle class and social security.
One other comment, will employers keep workers given the increased age for retirement even if they are physically able to manage the job. I suspect many will be forced to seek out other positions to survive.

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This page contains a single entry by Jon Coppelman published on November 22, 2010 1:09 PM.

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