Insights Blog

Worldly Philosopher: Disparate Impacts of Raising the Retirement Age

March 25, 2015

This week's Worldly Philosopher, Kyle Moore, discusses how the disparity in morbidity between Black and White individuals can result in unequal retirement time and benefits.

The New England Journal of Medicine recently published two articles calling on the medical and public health fields to engage in the #BlackLivesMatter movement. In a previous post, I spoke about the importance of the #BlackLivesMatter movement to economic policy in general and retirement policy in particular. Policymakers and the public need to understand how different racial group's health status effects retirement. Otherwise, they run the risk of enacting policies, such as raising the retirement age, that are likely to have a disparate impact on communities of color.

Blacks Don't Make it to Retirement Without Health Limitations

We know that being sick increases the chance that a person will retire early. We also know a lot about the differences in morbidity between Blacks and Whites. For example:

  1. Blacks have a 36% higher chance than Whites of developing a work-limiting health condition during their working careers.
  2. Blacks develop activity limitations caused by chronic conditions around age 61 – six years before Social Security's normal retirement age - while Whites develop these limitations around 67.

Racial Health Disparities Can Lead to Decreased Social Security Benefits
These health disparities put Blacks at high risk for retiring before they're able to secure their full Social Security benefit. Social Security pays you more the longer you delay retirement. Right now, you get maximum benefits if you can wait until 70 to retire. If you retire early, at age 62, your monthly benefit is lower. This rewards people for working as long as they can, but penalizes those who cannot.

Combined with the fact that Blacks live shorter lives than Whites on average, we have a situation where Blacks collect a smaller benefit- and for fewer years - than Whites.

Proposals to Raise the Retirement Age Would Increase Disparities
Policy makers have proposed to raise the retirement age for two reasons. First, to ensure the solvency of the Social Security program. Second, longer lifespans lead some to assume that people can work longer. Not only would this policy push the possibility of having some years of healthy retirement further out of reach for all Americans, but it would have a disparate impact on the Black community given their higher risk of early retirement.

The Solution is in Prevention and Better Retirement Institutions
Racial disparities in social and economic life in the U.S. are already too stark to ignore—we can't afford to make things worse with poorly designed economic policy. Rather, we need to directly address the causes of racial disparities in health and quality of life. That means increasing access to preventative care and stemming the development of the chronic conditions that lead to activity limitations. We also must strengthen Social Security by raising the cap on taxable earnings and institute Guaranteed Retirement Accounts to ensure people at risk of early retirement to have income for the remainder of their lives.