GAO Warns Against Raising Age for Retirees

Raising the retirement age could help buttress the financial solvency of the Social Security retirement fund but would cause serious hardships among blue-collar workers, the General Accounting Office will warn in a report to be issued today.

Even for those older workers who are healthy, the chances of keeping a job well into their 60s could be problematic, according to the GAO, the investigative arm of the Congress.

Many of the proposals now being offered in Congress for the future of Social Security include provisions that would make workers wait longer before they collect benefits. Advocates point out that each new generation of workers is healthier and has a greater life expectancy.

However, the GAO analysis says that millions of Americans, particularly those in blue-collar occupations, have physically demanding jobs and are more likely to suffer from health problems than workers in white-collar jobs.

For these workers, a delayed retirement age could be a hardship, forcing them to work despite the discomfort and pain of health problems that worsen with age. Some of them might have to apply for disability benefits, which would drive up the cost of that program for the federal government.

“Blue-collar workers are more likely to have musculoskeletal problems, respiratory diseases, diabetes and emotional disorders than are white-collar workers,” the GAO said in its report. “For example, blue-collar workers are 58% more likely to have arthritis, 42% more likely to have chronic lung diseases and 25% more likely to have emotional disorders,” the report said.

And for older workers who are “willing and able to extend their careers . . . it is unclear whether employers will be willing to retain or hire them because of negative perceptions about costs and productivity,” the GAO said.

A copy of the report, which will be presented at a hearing today of the Senate’s Special Committee on Aging, was obtained by The Times.

Under current law, workers can collect full retirement benefits at age 65. They also can take early retirement at 62, receiving 80% of the full benefit. For those retiring after 62, the pension amount increases in steps each year to 100% of benefits at 65. A majority of workers (53%) now begin drawing benefits at 62.

The retirement age for full benefits is now scheduled to rise in stages, beginning in the year 2000, until it reaches 67 for those born in 1960 or later. And for those who take early retirement at 62, the benefit will be reduced to 70% of the full retirement package.

Some of the proposals before Congress would boost the full retirement age to 70 and the early retirement age to 65.

“Longer life expectancy and the improved health of the nation’s elderly are the primary justifications for these recommended increases,” according to the GAO.

A delayed retirement helps the system in two ways: Workers pay Social Security taxes for a longer time and wait longer to collect benefits. A one-year extension of the retirement age is equivalent to about a 7% cut in total lifetime benefits for an average worker, according to calculations by economist Gary Burtless of the Brookings Institution, who will testify at today’s hearing.

The hearing is one in a series called by Sen. Charles E. Grassley (R-Iowa), chairman of the Special Committee on Aging, to consider the future of Social Security, the biggest government program. Benefit checks are mailed each month to 44 million Americans, including 34 million retired workers.

Grassley said he believes the country and Congress must have a full debate before deciding on the best way to deal with the complex issue of assuring Social Security’s future. Raising the retirement age, for example, “would have a ripple effect on the labor market, other federal programs and private pension programs,” he said Tuesday.

“Social Security is an important program and any changes to it will have real effects on people’s lives. We have to consider our actions carefully.”

The population of retirees will double over the next 30 years as the largest generation in American history--baby boomers born in the years 1946 through 1964--leaves the work force.

The system faces a financial crunch beginning in 2032, when payroll taxes will be sufficient to pay only 75% of the benefits promised under current law. Members of Congress will be debating the best way to close that gap, hoping to avoid either major tax increases or big cuts in benefits.

President Clinton and Vice President Al Gore are participating in a series of town hall meetings as part of a yearlong discussion of the future of Social Security, culminating in a White House conference on the topic in December. The president has promised that he will sit down with the leaders of Congress in January to develop a bipartisan plan to assure the long-range solvency of the program.

Meanwhile, most Republican members of Congress are supporting plans that would permit workers to keep a portion of their Social Security payroll taxes and place the money in individual investment accounts containing stocks and bonds.

The rank-and-file members of the Democratic Party in Congress are strong supporters of the current system and contend that its future can be guaranteed with only minor alterations. Democrats by and large oppose private investment plans, saying that they would be too risky because of possible sharp drops in the stock market.