A Progressive Retirement Age?

Yesterday, Zeke Emanuel advanced an interesting proposal for Social Security and Medicare in a blog at The New York Times: varying the retirement ages for lifetime earnings. This policy is a response to a common criticism of raising the retirement ages that increases in life expectancy over time have been uneven across income groups. Emanuel's idea would work as follows:

People in the bottom half of the lifetime earnings distribution would become eligible for normal retirement benefits at age 65 for Medicare and 66 for Social Security, just as they are today. But people in the next quarter of the lifetime earnings distribution would become eligible for the respective programs at 67 and 68, and those in the top quarter would become eligible at 70 and 71. All eligibility ages would increase over time, as they are scheduled to now.

In all income brackets, those choosing to retire later than the standard age would still receive higher Social Security benefits, called delayed-retirement credits. For those choosing to retire earlier and accept reduced benefits, on the other hand, nothing would change in the lower bracket, while the minimum age would increase in the two higher income brackets. And wealthier older people would have the choice of buying into Medicare at age 65, though they would have to pay for it before the age of 70.

Emanuel also notes that the progressive retirement ages would reflect the difficulty each income group would have in continuing to work at older ages. People in the bottom half of the distribution are more likely to be in physically demanding jobs, while upper-income people would generally not face that difficulty and otherwise be able to support themselves.

We have written before that raising the retirement ages would be good for the budget and the economy by encouraging people to work longer and accumulate greater savings. This sort of modification is a productive and interesting idea to address concerns about the effects of the policy.