Another reason to save for retirement

Paraphrased from “The New 65” (http://slate.com/id/2113883/) written by William Saletan

Here's what we've learned from the Social Security debate so far. Republicans are right that the system is heading for bankruptcy. Democrats are right that personal retirement accounts, whatever their future merits, won't pay off the system's current debts. Republicans won't raise taxes; Democrats won't cut benefits. It looks like there's no way out. But there is a way.
According to the latest government data, men who reached age 65 in 2002 had on average 16.6 years of life before them, and women had 19.5 years—about five years more than Social Security originally budgeted for. At age 70, men and women in 2002 could still expect more remaining life (13.2 years for men, 15.8 for women) than their 65-year-old counterparts could in 1935. Even a 75-year-old man in 2002 could expect 10.3 more years, nearly as many as a 65-year-old man could expect in 1935. If you were designing a system today for men with 11 or 12 remaining years and for women with 15 remaining years, you wouldn't set the retirement age at 65. You'd set it between 70 and 75.

How much money would a higher retirement age save? According to the Congressional Budget Office, if the ascent to age 67 were accelerated and completed by 2016, and if the retirement age kept rising two months a year until it hit age 70 in 2037, and if the rate of increase then slowed to one month every two years, Social Security outlays in 2050 would decline by 12 percent. A fully adjusted retirement age--one that kept pace with biology instead of lagging 40 years behind it, as the CBO's scenario does--would generate an even bigger surplus. By one rule of thumb, every year of recipient eligibility consumes about 7 percent of Social Security's financial commitments. Compared to the currently assumed retirement age of 67, an increase to age 73 could cut the government's obligations by as much as 40 percent. Either way, the projected Social Security deficit would disappear--and with it, the Democratic objection to personal retirement accounts, which could be funded out of the new payroll tax surplus.

How old do you want to be when you retire; 55, 65, or maybe 75? You have a choice to work later in life and continue to pay taxes, or lay around in leisure and receive benefits from a retirement account that you built for yourself. See my previous post “Retirement is not an age”