Tuesday, April 05, 2016

As the poor die earlier, Social Security isn't paying off


By/ Aimee Picchi/ MoneyWatch/ April 4, 2016

Death and taxes may be inevitable, but they hit the rich and poor in different -- and sometimes unfair -- ways.

That's increasingly evident with the expected life spans of today's workers, given that low-income Americans are projected to die as many as 13 years earlier than their wealthier cohort, while a century ago the rich and poor had relatively identical lifespans, according to new research into longevity and retirement from the Government Accountability Office that was prepared for Democratic presidential candidate Sen. Bernie Sanders (D-VT).

The growing gap between the lifespans of the rich and poor is eating away at the benefits that poor workers can expect from Social Security, the report found. American men who make about $20,000 annually are likely to lose as much as 14 percent of their Social Security lifetime benefits because of their shorter-than-average lives, while men making $80,000 per year stand to see a gain of 18 percent in their benefits given their additional years on earth, the report found. Boosting the retirement age would only exacerbate those disparities, the GAO warned.

Because poor Americans often rely on Social Security as their sole means of support in retirement, boosting the retirement age would provide a double-whammy to many low-income workers. They'd still die at an earlier age than rich Americans, while also being penalized if they couldn't continue working until an even older full retirement age.


Given that Social Security's combined reserves may be dry by 2034, policy makers are floating ideas such as raising the retirement age. But there are other ways to boost the program's reserves, including lifting the cap on taxable wage income, which now stands at $118,000, or raising the payroll tax.

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