In 1935, when the Social Security Act was passed, the average American lifespan was 61.7 years.
Today, it’s 81.7.
Suddenly, keeping the retirement age at 60 doesn’t make much sense. Or so says AIG Chairman Robert Benmosche, who favors increasing the retirement age to 80. An economy with a rapidly aging workforce can only survive, he argues, if it “keeps pensions and medical services affordable . . . [to] take the burden off the youth.” This means pruning the roster of costly retirees.
Now, coming from an executive whose firm was bailed out by U.S. taxpayers in 2010 and who is speaking from his “seaside villa in Croatia,” these comments might seem a bit, well, rich. A Wall Street fat cat like him would not feel the brunt of such retirement age hikes in the same way the average American would.
But, to get beyond the snark, Benmosche has a point: the retirement age needs to evolve. We are living longer, healthier lives than ever before, and this welcome development has had unwelcome consequences for the budgets of our social welfare programs. Baby Boomers are reaping the rewards of the benefits they voted into being, while prospects for young workers continue to flag. Very soon, the numbers won’t add up, and we will face a choice between reforming benefits and the retirement age or burying the country’s workforce under mountains of increased taxation.
These wars against the young and against arithmetic are undesirable and unsustainable. If European and American pensions and social security benefits are to continue, we will eventually have to link national retirement ages to expected longevity. This doesn’t mean we should do it all at once; reforms should be gradual and made with sensitivity to current and prospective retirees, who have planned their lives based on the old system.
But the reforms must be made. One way or another, change is coming.