Longevity Policy: Facing Up to Longevity Issues Affecting Social Security, Pensions, and Older Workers

Contents

v Contents Acknowledgments ix 1 The Policy Challenges of Increasing Longevity: Paying the Costs 1 of Living Longer Life-Expectancy Increases 2 This Book 5 Five Policy Recommendations 8 Conclusions 12 Part 1: Labor Market Policy toward Older Workers 2 Can Older Workers Extend Their Work Lives? Changes in 15 Health and Job Requirements Why Work Longer? 15 Health Indicators Affecting the Ability to Work at Older Ages 17 Factors Affecting Health at Older Ages 23 Ability to Work at Older Ages 26 The Decline in Physically Demanding Jobs 28 Phased Retirement and Its Relevance to Raising the Retirement Age 32 Vulnerable Workers 34 Public Policy Issues 37 Conclusions 37 Part 2: Social Security Policy 3 Automatic Adjustment Mechanisms to Maintain Social 41 Security’s Solvency The Problem 42 Automatic Adjustment Mechanisms 43 International Experience with Automatic Adjustment Mechanisms 48 Comparing the Options: The Pros and Cons 62 Distributional Consequences 64 Indexing Options for U.S. Social Security 65 Conclusions 67 Policy Recommendations 68 vi 4 Raising the Early Retirement Age 71 Views on Raising the Early Retirement Age 73 Comparable Early Retirement Ages with Increases in 75 Life Expectancy Fairness 76 An Alternative to Benefit Cuts 77 International Experience 79 Flexible Normal Retirement Age 83 Raising the Maximum Age for Actuarial Adjustment of Benefits 84 Policy Recommendations 84 5 Longevity Insurance Benefits 87 An Increasing Risk of Poverty with Advancing Age 88 Longevity Insurance 90 Longevity Insurance in the Private Sector and Internationally 99 Conclusions 100 Policy Recommendations 101 Part 3: Pension Policy 6 Defined Contribution Plans: Encouraging Annuitization 105 Policies Encouraging Workers to Annuitize 106 The Use of Information to Affect Behavior: Education, Framing, 113 and Advice Policy Recommendations 115 7 Defined Benefit Plans: Flexibility to Deal with Increasing 117 Life Expectancy Effect of Life-Expectancy Increases on Defined Benefit Plan Costs 117 Employer Pension Responses to Increased Worker Longevity 119 International Survey 121 A Life Expectancy–Indexed DB Plan 122 Life-Expectancy Indexing of Fixed Ages in Pension Law 124 Lump Sum Benefits in Defined Benefit Plans 125 Policy Recommendations 125 Part 4: Conclusion 8 Policy Recommendations 129 Policy Recommendations 129 Conclusions 133 References 135 The Author 149 Index 151 About the Institute 159 ...