The Social Security Amendment of 1983

The retirement age of 65 was established by the original Social Security Act in 1935 when the average 20 year old American could expect to live to the age of 64 years and 5 months. By 1983 average lifespan for a 20 year old had risen to 72 years and 8 months. The Social Security Amendment of 1983 raised the retirement age from 65 to 67 over a period of time.

Life Expectancy
Source: http://aging.senate.gov/crs/aging1.pdf

By 2009 life expectancy had again risen to 78.7 and even with the target retirement age increase the average retiree would now receiving 12.7 years of benefits.

1983 21 65 74.5 44 9.5 4.63 5.40% 50.02% 11% 44.52%
1989 21 65 75 44 10 4.40 5.70% 50.16% 12% 44.14%
1996 21 65 76 44 11 4.00 6.06% 48.48% 13% 42.18%
2000 21 65 77 44 12 3.67 6.20% 45.47% 15% 38.65%
2006 21 65.67 78 44.67 12.33 3.62 6.20% 44.91% 17% 37.28%
2009 21 66 78.7 45 12.7 3.54 6.20% 43.94% 17% 36.47%

The chart shows how the money collected for benefits has been reduced dramatically as our average lifespan has increased, and medical science is not slowing down. Life expectancy continues to increase by about 4 years every generation and the Social Security system cannot survive that rate of benefit growth by continually raising the OASDI rate.

As life expectancy increased in the preceding table, the slower increase in the retirement age proposed by the 1983 legislation has not kept pace and the problem is being further exaggerated by the increasing percentage used for Disability Insurance. As the make/take ratio dropped and the DI rate increased the amount actually available for benefits has dropped below the 40% level that we estimated. This problem will only get worse as life expectancy continues to increase especially if we don’t get a handle on the disability factor.

Too many people today are saying things like, “My parents retired at 65 and got 40% of their income for the rest of their life, so I want to be able to retire at 65 and get 40% for the rest of my life”. But this is like mixing apples and oranges. The fixed retirement age of 65 (apples) was used for both parent and child while the variable “rest of my life” (oranges) increases over time.

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