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If You're Poor, You'll Get Less Out Of Social Security Than If You're Rich

Discussions about raising the retirement age will give the low-income the short shrift—especially since they live shorter lives to begin with.

If You're Poor, You'll Get Less Out Of Social Security Than If You're Rich

Photo: Alexey Rotanov via Shutterstock

If you're poor, you're likely to receive less in Social Security benefits than if you're rich. That's the headline from a new study looking at how life expectancy affects the federal government's most popular program.

At the request of Senator Bernie Sanders, the Government Accountability Office analyzed how people of different incomes experience Social Security. Extensive research shows that those on lower incomes live up to 13 years less than those on higher incomes. So it stands to reason they would draw fewer monthly checks. And indeed that's the case. Men earning $20,000 a year can expect to receive 11% to 14% less over their lifetime than men on $80,000 a year, the GAO found.

With Social Security expected to run out of money by 2034 (if no changes are made) many people have called for raising the retirement age. This is what other countries have done, and it seems to make good sense. If people are living and working longer, Social Security should kick in later, they reason.

The problem, as the GAO shows, is this approach disproportionately affects the poor. As life expectancy is rising slower among those on lower incomes, they would see even less from the Social Security trust fund than they do now. More to the point, people on lower incomes tend to enjoy their jobs less and their work tends to be more physical. Asking someone to work at a construction site when they're 69 is a different thing than asking someone to work as, say, a business consultant.

Workers can start claiming benefits at 62, but at a reduced rate. Full benefits, calculated as an average of 35 years of earnings, kick in at 65 or 67, depending on a person's birth year. Delaying retirement until 70 results in greater benefits, though most people on lower incomes don't wait that long. Those claiming retirement at 62 are disproportionately poorer. Only 14% of people on the lowest third of incomes wait until they're 66, the Brookings Institution says.

Other reforms, such as means-testing benefits (so people on higher incomes get proportionately less), and raising the point at which income is subject to Social Security taxes (so people earning more would pay more tax) are both more progressive than raising the retirement age.

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