42: When I'm Sixty-Four

the retirement age and kind of all about it. So it's historically been sixty five, but it's been inching higher, and we wanted to talk about this piece that Peter coy wrote. Um In that article, Peter wrote about this really interesting working paper from the National Bureau of Economic Research, and in that it says that on average, a lot of Americans are actually healthy enough to work past their sixty five birthday and that has the normal was economic implications,

and Kate, the political implications are not small either. I mean, of course, you also have the not so nice question that even if Americans can worse pacts sixty do employers actually want them so to do all of those things? We actually brought into the studio Peter Coy. So, Peter, thanks for joining us. Thank you. Peter is Um, the Business Week's economic editor and the author of this piece. So Peter, I'm a little younger than you, but a

little older than Kate. I have it in my mind that sixty five is this magical benchmark, but you're about to tell us it's not, and that it's moving all the time. First of all, when it's sixty five, come from UM. Sixty five is where the retirement age, the normal retirement age has been since social Security was started in the nineteen thirties and during the Great Depression and uh in the social security reforms that were intended to stabilize the finances, they said, okay, we've got to raise

it in stages to sixty seven. So I'm fifty, My my standard normal timement age is going to be sixty six and a half. Now, that doesn't mean I can't retire earlier than that. I could start collecting benefits at sixty two the early retirement as as the earliest check can get them. If I do that, I'm gonna get

less money per paycheck. And I can also retire later and get bigger benefits per check if I wait till like sixty eight or something, and they try to do it to make it actuarily fair, so your lifetime benefits will be the same no matter when you retire. And the sixty number, though, where did that come from? You know? Prior to Social Security, well, um, there had been various state and private pension systems that had kind of locked

onto either sixty five or seventies. So it was a little bit of a choice, well which one should we go with? And I don't know who's FDR or Congress settled on sixty five. There's a myth that it goes back to Otto von Bismarck, the first Chancellor of United Germany, who it's true that under Bismarck, Prussia and Germany did

have sort of the world's first public pension system. But contrary to the myth at the age, there was seventy when it started, and later after Bismarck died, it was lower to sixty five, and that's why it sticks in people's minds. So wait a second. We owe the social Security system in the United States to the iron Chancellor, the iron consular Yes, really, I mean, you can't say it it's one person because after Germany, then Britain had one,

and then as we said, there were green shoots. There were different kind of pension systems in the US, but so security really changed. Everything was a huge program, and

so it's a bedrock of American security today. I was doing a little research on that sixty and I found out this really funny rumor that apparently was going around the time of when Bismarck was around, and apparently the rumor was that they turned it into six because that was when Bismarck himself wanted to retire, but that that ended up being false, but that was apparently the rumor

at the time that was going around. But you know, back when or seventy, whichever the choice was, when those are being put in, average life expectancy was much lower than it is now, so people tended to have quite short retirements. In fact, there wasn't even really a concept of retirement for most of human history. People would just

work until they croaked. I think croaked is a technical term, right dan um cold term for death, or until they just were completely incapacitated um, in which case they'd just be lift in the field pretty much. And my article talks about this new research at Kate mentioned the National Beer of Economic Research has run a couple of papers recently with data which is really nice. It's really good news that Americans are living longer a but also be

healthier lives. So it's not only that you're you're alive at say seventy, but you you can still work. So the headline ahead on the article at one point was admitted you could keep working at seventy. You know, if you can golf eighteen holes under the broiling hot sun, presumably you can sit for eight hours at a desk.

And you get into this in your article. But has the system around which this whole concept of retirement and social security and all the infrastructure that's been built up around it, has it caught up with this ability to work well past seventy that you're describing. Well, the move, the gradual, incremental move from to sixty seven was a step in that direction, but the people are saying we

can go past that. You could go to seventy or something. Now, this art's getting into some sticky stuff, which is like if you have a job, you know, doing podcasts on the radio, then it's really not physically strenuous work except for maybe your vocal cords, and so you could work

easily to seventy. But if you have a job digging ditches or working on an assembly line, or changing beds in a hotel, or waiting tables or flipping burgers, there are a lot of jobs that are physically demanding, and uh they also tend to be the lower paying jobs. I mean NFL and NBA being exceptions. So the very people who are getting less money for their work are also in jobs that are harder to do at older ages, so they have less desirable work and um, for them,

going to seventy truly would be a hardship. So we really haven't figured out a way to deal with taking advantage of the greater health and longevity for the most of the population for fixing source securities finances without imposing undue burden on the low income generally low income segment of population. And as you mentioned your piece, the way social security works is it's not kind of I mean, I'm sorry, it is black and white. Either you are

not working or you are. There's no kind of there's no gradient to it, and right, and the disability system works the same way because the disability income is a component of social security. You don't have to you can get at any age. But it's just like that, you have a whole determination about whether you are well enough to work, and if you are, you don't get the benefit. The benefit is a percent or zero. And so it's

really a cliff effect. Because it's a cliff effect, it tends to cause a lot of debate, you know, and and argumentation. It's to strenuous for both sides, both the applicant and the government. And so how would you there's no One of the ideas I had was okay, well there should be a way where okay, if you, if you if you are one of these people who has a physically strenuous job, then we'll keep we'll have the retirement age at seventy, but you can just apply for disability.

And the problem is that just turns out to be a huge administrative headache. Is no way he wants to go through that. In addition to the ability to work for longer. Don't people have to work for longer now because they're going to be around for a greater period of time, they need to maintain their house. Then when it gives some money to their grandchildren. They want to do all these things I make. People need the money. It's not just about being physically or intellectually able to

do it. There's a necessity, there isn't there. So think about that. We're gonna get you on that in a second. But first I have a question might reflect the fact I was born outside the United States. People here this term the third rail. Social Security is the third rail, But help me out what is the first and what is the second? So this is a subway analogy. Actually, Um, so you know you're standing on the subway platform. You

look down, you see three rails. The first two are what the car actually runs on, and then the third rail. And if you look closely, the third rail is actually much thicker. It's kind of like it almost looks like it's like a box, long box, and it actually encases all of the electricity that uses to run the subway line. So the idea is that if you touch it, you'll

like just like instantly die. It's horrible. And then and everyone says, like if you hapen to fall in the subway or something like that, like something atrocious, you should never like go to the wall of the subway. You should try to get in the middle of the tracks, because if you touch the third rail, no matter what, you will die. And an analogy invented just for social security, I think people use it for all, like like really hot button political things, you know, like if you touch it,

you're like, your dad is a politician. If you're like, you know, a Republican and you want to start talking about I don't know, some sort of like progressive social thing third rail, right, Like, you touch it, your dad? Okay, that's helpful, you know, Peter. We hear a lot about people having to go back to work after they've retired because they've realized not only are they healthy, they didn't put away enough. Now we've all heard these stories, the

burg of Flipper and so on. How does that feed in to the guts of your story in bloom Book Business Week. Well, first of all, you don't have to retire at any age, and people are free to work till past a hundred if they want to. What we're talking about here is mostly what's the normal retirement age, which is the son of the sweet spot for your benefits, And it turns out lots of people take this normal

retirement age is almost like the spected retirement. So if you just look at the peaks and troughs of when people retire, there's a big jump at sixty two, which is the earliest you can get social security, and that hasn't changed, by the way, when the normal went from and then you get another one whatever the normal retirement ages. And so there's little bit of a social expectations component to this. The government is kind of molding people's behavior

just by what it sets for its these numbers. But don't you think of like sixty two and then sixty five as well as these is kind of like mental finish lines, and especially for you know, these jobs that we're talking about, the you know, the grocery bagger, the burger flipper. I mean, if you're doing a job like that, you have to have a finish line. You probably did, you see what I'm saying that to take away that finished line, I'm sure would be difficult to move the

finish line exactly when you're in the race. When you're already in the race. Why they didn't move up the sixty two. It kept a sixty to do where it was for all those people who just you know, we're just dying and dying to get to when they as soon as they can get a sort of security check. Interesting. Yeah, so why doesn't Congress just go ahead and mandate a new retirement age of seventy and simultaneously make it easier for people who have physically demanding jobs to go on

disability at say sixty five. Why don't they just do that? Well, it is a possibility. As I said before, one of the problems is just the sheer administrative headache of trying to figure al who's disabled and who's not. That would be to be it would just flood the system. But they could readefine it right, you had a physically demanding job, right, So then it would be by career, which is yet

another idea. And that's not easy either, because you can imagine the Gamesman chip of everybody trying to say, oh, my job is physically demanding, I want that included. And so the Greeks had have no lary elaborate system of uh wait a second, where emulating the Greek economia, Well, that's that's yours. They're over like five hundred job titles in Greece that were labeled owners or physically demanding, including

like hairdressers, and radio technicians and so on. That's nothing about the radio technicians, but I'm just saying, and the people retire at age fifty. That got a little bit ridiculous. Okay, So we've got Greek hair dresses and the Iron Chancellor all helping shape just debate on social security for time in the US. Yeah, it's bizarre. And like you said, it really is the third rail though, because like as a politician, and we talked about like the the mental

idea of a finish line. If you're in one of these jobs, I mean, you're not going to get voted in again. If you want to tell people actually you're going to work another eight years, you have to. Okay, you were saying before that you you you're younger, you didn't actually expect so security to be there for you when you retire. I don't. I don't know if that makes me sound like a huge, huge cynic though, Um no,

I don't. I mean, and I think a lot of people in my age don't as well, which is why people, you know, we really take our four oh n K seriously and you know, trying to contribute as much as you can do that because you don't expect there to be this kind of little safety net for you when you get there. So for your generation, it's not really the third royle, I guess not. I think like for me, if I heard a politician saying that they want to change the retirement age for someone who is my age,

it wouldn't make a difference to me. I think it would just kind of be in one year out the other, and then I listen to all their other platforms. But if they want to tell someone who's fifty five, actually, instead of working for another seven years, let's assume they were retiring at sixty two, No, you have to work for another fifteen years. That's I don't know. That just seems unfair for just to make it simple, that would

be difficult to stomach. I would imagine if I were fifty five years old and someone was telling me you have to actually work double what you thought you had, Right, you know, there's no shortage of elected officials who will tell us that at some point quote entitlements unquote have to be quote reformed unquote, and social securities generally the main thing they're talking about there. But does it have

to be well? Has something has to happen? Even the kind of the liberal interest groups that are rigorously defending social security and that are mistrustful of raising retirement age because they see it correctly as a benefit cut, do think something needs to be done. And the usual debate is how much of the change should occur in the

cutting benefits versus increasing revenue. And if you do increase revenue, should it be entirely from within the system, i e. From people's wages or could you draw on a bigger pool of money? And there are many options you can think of their you know, transactions, financial transaction tax or capital gains tax or something like that to to kind of get the bigger pot of money that's out there in the economy. Interesting, So what's the next chapter in this story? I think that we're coming up on. I

think every year that tweaks a little bit. But the the trust fund is going to run out in twenty thirty six or seven, and at that point the only money the system will have is the money that's coming in, which covers only about three quarters of benefits. And well before that they're gonna have to come up with another tweak to Social Security because there's no way we're gonna just like cut benefits by a quarter, So I think, who knows, maybe in the next presidential administration they're gonna

have to start revisiting this. Is it possible to even live on Social Security like people? I can imagine it would be tough. Here in New York City people do Dan. It's it's a musing how many I wish I had the percentages of my fingertips. But as a substantial percentage of Americans who have no pension, private pension and no retirement savings and social Security is there primary means of support and they are able to live a decent life

on that, you know, a penurious life. Interesting. I mean one thing I also find interesting about you know, if you want to talk about changing retirement benefits, as you look at state and city pension systems, you know, their public pension systems, you know, kind of a local version of Social Security, if you will. And you've seen a few court rulings that actually really benefit retirees, um like more so than actually the law would necessarily UM agree with.

Great example is Detroit um in that bankruptcy settlement, those pensioners got about eighty seven cents on the dollar. Well, you saw some bondholders who were legally above pensions like they were, there was no question about it. I mean, some walked away with nothing right. I think that reflects the public's perception that it's really hard to just leave

people in the lurch. But I also think it reflects a complete inability to predict what can happen with benefits and when it's really you know, someone's life in the line. You know what you're talking like, can you really survive

on what's currently Social Security is? And I think to me, anyway, when I'm looking at social Security, seeing rulings like in Detroit really make you realize that it's impossible to predict what you can do because even if you know every law about this, who's to say, you know, emotions won't prevail. You know, a lot of people talk about working longer

because they need the money to retire. And then and they do surveys, so they ask people every year do you expect to retire with the next year, and the answer we no, no, no, And then one year to say do you expect to retire the next year and they say, oh, I already retire last year. It happens amazingly abruptly for a lot of people. A spouse gets sick, you get sick, change at work, and suddenly you're out of the You're out of the workforce. Okay, so then

let me ask you the obvious question. You guys are a little bit older than I am, when do you guys plan on retiring? Well, I have a five month old daughter in addition to a teenage son, so I'm yeah, never is a pretty good estimate. Great, sorry to hear that, But don't you well, I shouldn't say this because I just finished saying that you shouldn't allow, you know, random numbers picked out of the government to determine your thinking. But six or six and a half says the economist

will come record an episode at your beach house, Peter. So, in all seriousness, thanks for joining us. Thank you. Benchmark will be back next week and until then, you can find us on the Bloomberg terminal and Bloomberg dot com, as well as iTunes and Stitcher. While you're there, take a minute to rate and review the show so more listeners can find us and let us know what you thought of the show. You can talk to Dan and

I on Twitter. You can find Dannet at Daniel Mass d C and you can find me at by Keith Smith. And our guest Peter is on Twitter at Peter Coy, and don't forget to check out the article he's written about this. We'll see you next week.