Trickle-Down Social Security

Life expectancy at age 65 has grown by about six years since Social Security began paying benefits in 1940 and, despite some recent temporary declines, is expected to increase significantly further in future decades. Despite a modest increase in the age at which people can claim full Social Security benefits (from 65 to 67), future retirees are scheduled to collect benefits for longer than current retirees. The additional benefits paid by the failure to adjust the retirement age for increased life expectancy accrue disproportionately to higher-income retirees. For a variety of reasons, including a lower probability of living to retirement age, only a small portion trickles down to those with limited incomes. Policymakers could better protect lower-income retirees by increasing the retirement age and devoting the resulting savings to raising payments or other supports to those in the bottom half of the income distribution.