Recession May Actually Help Social Security System

People often wish to retire early in order to enjoy the earnings of their younger times. Many realized during recession that they would not be able to do so any more as their investments had to bite the dust in the bad times. But according to a RAND Corporation study this may actually be a good thing.

The burden on the Social Security and Medicare system is quite high already due to the large number of retired people and the burden would be higher if people were to retire early. The report was published in the Journal of Economic Perspectives.

RAND Corporation suggests that the number of people waiting longer to retire is increasing. This trend has been seen since 1990s when around 17% of the Americans between the ages of 65 to 75 years were found to be working. The percentage has increased to 25% in 2010. This could be due to increase in life expectancy, healthier people, increasing number of women in workplace and other reasons.

The study also says that the skill composition of the workforce is changing. The workers have to put in less physical efforts and get paid more. Further, when both the spouses work, men stay longer at work as they plan to retire with their wives who are younger than them. People also want more money and so work for longer. They are capable of doing so because of good health promoted by better healthcare system.

Julie Zissimopoulos, study co-author and an economist at RAND Corporation further added that the trend will continue till at least 2030. But the Federal Bureau of Labor Statistics disagrees and has suggested that the trend will start reversing from 2020 onwards.

In addition to reducing the burden on Social Security and Medicare system, people working longer in their lifetime, also helps the economy by ensuring that they pay taxes for longer. As a result, there will be more money going into Social Security system.

Keeping things in perspective, tangible changes that may mean delay in giving the benefits of Social Security to older people is only likely to happen by 2022. According to the researchers, it would be beneficial if the government made policies to benefit people who work for longer. Many retirement benefit programs have disincentives attached to working till late. It would be better to remove these and encourage people to work longer in their life.

Speak Your Mind