NCPA Report Says Government Finances Would be Helped
DALLAS (November 3, 2006) – In two years the first of 77 million baby boomers will become eligible for early retirement benefits from Social Security, beginning a three decade long tidal wave that will ultimately lead to a doubling of retired workers and severely straining the nation’s economy. One way to soften the blow of boomers’ retirement, according to a new report from the National Center for Policy Analysis (NCPA), is for government to encourage boomers to stay in the workforce longer, or at least not encourage them to leave.
“Funding boomers’ retirement benefits will put a severe strain on workers,” said Andrew Rettenmaier, executive associate director of the Private Enterprise Research Center at Texas A&M University and an NCPA Senior Fellow who co-authored the report. “Encouraging boomers to work longer would be a win-win. It would help us deal with funding their retirement benefits and it would help the economy.”
According to the report, government policies actually encourage seniors not to work. For example:
- Social Security withholds a portion of some people’s benefits if they earn above a certain amount before they reach the normal retirement age.
- Those who continue working past the early retirement age continue to pay Social Security taxes but do not get those taxes back as additional benefits.
- The reward (in terms of greater monthly benefits) for people who delay their retirement is too low for many retirees.
- The rewards for early retirement increase whenever life expectancy increases.
“Encouraging work would improve the finances of seniors and government,” said NCPA Senior Policy Analyst Matt Moore. “For example, if all of the baby boomers worked another two years and only earned the minimum wage it would mean an additional 160 billion hours worked and an extra $825 billion in wages.”
The report suggests a few simple reforms to give seniors greater freedom and flexibility to time their retirement. For example:
- Let early retirees keep their benefits, regardless of how much they earn in wages;
- Reduce payroll taxes once a worker is eligible to receive Social Security benefits; and
- Index the retirement ages so that they increase as life expectancy increases.