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Preface
- Brookings Institution Press
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Preface As the proportion of the population that is old has grown in the United States and other industrial countries, policymakers and scholars have devoted increasing attention to the fiscal consequence of aging. To students of government budgets this development is unsurprising. Public programs that provide income and health insurance to the aged are already large and costly. And as elderly populations grow, keeping government affordable will mean keeping the cost of old-age programs affordable. The essays in this volume examine one approach to this fiscal challenge— increasing the age of retirement. Later retirements could occur because worker preferences change or because public policy encourages people to work until older ages. Since the early 1990s the age at which U.S. workers have left the labor force has risen gradually. The delay in retirement is traceable in part to a shift in public and private pension arrangements. Pension rules and financial incentives that once encouraged workers to exit the workforce before their mid-60s have been eliminated or revised. In addition, workers may have become more aware that increasing life spans mean that they must either save more or work longer to enjoy a comfortable retirement. A gradual shift in social norms may also be conferring greater prestige on workers who exit the labor force at a later age rather than collect pensions at an earlier one. What would be the budgetary impact if Americans retired later than they currently do? Several of the essays in the volume address this question, directly or indirectly. If workers retire later, their lifetime earnings—and tax payments—are likely to be higher. If current pension rules and formulas remain unchanged, Social Security payments will be delayed. Workers who retire later receive payments for fewer years, but their monthly benefits are increased, so that the lifetime vii value of benefits will not be reduced. A delay in retirement may also reduce public health insurance benefits received under Medicare. The first chapters in this book present estimates of the overall impact on the federal budget of a continued increase in retirement ages. Later chapters address the plight of older Americans whose work capacity is limited. How much should we change pension formulas and insurance rules to encourage later retirement? What kind of provision should be made for workers whose health or economic circumstances make it hard to work past 60? We thank Kathleen Christensen and the Alfred P. Sloan Foundation for encouragement and financial support for the project. Funding was obtained under the Sloan Foundation’s Working Longer program, which provides support for research at a number of institutions to “expand and deepen our understanding of aging Americans’ work patterns.” Since the inception of the project we benefited from crucial contributions from Karen Smith and Richard Johnson of the Urban Institute and Mark Zandi and colleagues at Moody’s Analytics. These collaborators helped us develop and test the simulation estimates reported by Smith and Johnson in chapter 3. We are also grateful for the helpful comments and suggestions of the other contributors. Maria Ramrath, Kathleen Burke, Joe Ornstein, Natasha Plotkin, and Jean Marie Callan provided outstanding research assistance. Kathleen Eliot Yinug of Brookings Institution ably organized the conference at which the findings of the research project were first presented. At the Brookings Institution Press, Janet Walker managed editorial matters and Mary Paden edited the final manuscript; Larry Converse handled production, and Susan Woollen oversaw the cover development. viii Preface ...