Social Security Disability Affected by Raising Retirement Age

Currently, the debate is whether the earliest eligible retirement age, now set at 62, should be raised so that workers would work longer and benefits would be postponed, thus presumably saving millions or billions of dollars. Proponents point to longer life spans and healthier individuals, arguing that it is too costly to provide benefits for up to 30 years after retirement.

But a report from the Government Accountability Office has warned that the full retirement age would also have to be raised because Social Security disability insurance expenses would rise while retirement benefits remained the same. Raising the age limit might also create an incentive to rely on disability insurance rather than to keep working.

Studies also indicate that a large minority of workers nearing retirement age would be disproportionately affected by the raising of the retirement age limit. Older, less-educated workers usually have more medical issues that would not qualify for disability insurance benefits. Workers with chronic conditions would be forced to work longer, if possible, and risk losing their jobs. Since older workers who lose their jobs have a much harder time finding employment, raising the retirement age would create a financial hardship.

Furthermore, lower-income workers, including many minorities, African Americans and women, have more health issues because they typically work in physically demanding vocations such as construction, outdoor jobs, waitressing, janitorial, nursing and nursing home care. Many low-income jobs come with substandard health benefits as well.

Workers in physically-demanding jobs also tend to have lower retirement savings, if any, compared to white-collar workers of the same age, and statistically have shorter life expectancies.

One proposal to meet these concerns is to permit partial disability benefits or to increase supplemental income for retired workers. Raising payroll taxes to offset the loss of workers is unlikely given the current economic and political climate. In any event, President Obama’s fiscal responsibility commission will likely recommend other changes to Social Security to try and increase retirement incomes.