2 4 3 replacem The EBRI Notes ent rate is 97 percent; and for a 90 article, “Social Security Ref percent chance of orm: How Different Optio success, the m ns Might Af inimum required fect T-165 Future Funding,” September 2009, vol. 30, no. 9, My nam replacem eent rate is 149 percent. is Dallas Salisbury and I am the Pr If, on the other hand retirem esident and Chief Execu lists a few of the proposals on how the norm ent and initial receipt of Social tive Officer of the non- al Security benefits are delayed unt retirem partisan and nonprofit E ent age could be raised, and shows the re mployee Benefit Research il age 68, he can decrease the fi sulting im Institute (EBRI). Esta provem gures to 43, 66, and 97 percent, ent in the actuarial balance of blished in 1978, EBRI 6 respec OASDI by doing so. The im is comm tive itted exclus ly. Working longer reduces th ively to data d provem issem ents range fr ination, policy research, and edu e amount of savings, or non-earning incom om 0.10 percent for increasing the norm cation on fin e sources, a ancial al retirem security and em worker needs to have accum ent age to 67 now, instead of waiting unt ployee benefits. EBRI ulated in order to does not lobby or advocate specific policy have adequate incom il 2017, to 0.62 percent for increasing the norm e last throughout their al 5 retirem retirem recomm e ent. endations; the m nt age now to 67 and then by one ission is toStatemen provide objective and reliable month every two y t for the Record ears until reaching age 7 research and inform 0ation. All . of our research is ava ilable on the Internet at www.ebri.org and our savings and financial Meanwhile, the resu education material is at I wish to emphasize that working longer has been lts listed in www.choos EBRI Issue Brief etosave.org for the no. 319, July 2008, “EBRI 2008 Recent a long-term trend, not a new one. Labor force Retirees Survey: Report of Findings,” participation for those over 65 hit a low found that respondents typically point in 1993 but has risen since, (see retired for one of four EBRI Notes ® article, “Labor Force Partic Results ove reasons: retirem r time e f nt becom rom the Retir United States Senate Committee on Finance eipation Rates: The Population s affordable, lack of ement Confidence Survey job satisfaction, a desire for m Age 55 and Older, 2008,” vol. 31, no. (RCS) suggest that Am ore personal or ericans’ 2, February 2010 fa expectations of their likely re mily time, and/or their own hea ) particularly for those 65 tirem lth status. One of the m ent age have also changed ove to 70, for whom ajor fi it has risen from ndings from the survey is that r time. As docum under 24% to over ented in the em EBRI Issue Brief 34% over the past 17 years. As the num ployers have a narrow window of up to two year no. 340, March 2010 “The 2010 Retirem ber of Hearing on workers who can expect re s in which they m ent Confidence Survey: C ay be able to intervene to tiree health onfidence benefits Stabilizing but Preparations Continue to Erode,” change retiring workers’ decisions by offering th paid for by a former employer continues to declin the RCS found that al em incentives to rem e (see EBRI Notes ar atic m in with the com o le st one-quarter (24 , “Retiree Health pany. In percent) of workers reported they have post fact, m Benefit Trends Am any retirees report they would have been ong Medicare EligibleJuly 15, 2010 Population,” vol. 31, no. 1, January 2010 poned their expected ag open to an approach from their em e of retirement. Am ployer asking ) and the ong reasons cited are: poor econom them proportion of workers with defined contribution to stay longer with the com y (29 percent) pany. Sixty-; change in em one percent say they w retirement plans as opposed to traditional ploymenould have viewed the t (22 percent); and 1 inadequate finances (16 percent). experience p annuity only DB plans ositively. Ju continues to grow, (see st 10 perc Moreover, while worker res ent indicate th EBRI Notes ey would have reac artic ponses to a question asking the le, “Retire ted negative ment Plan ly to an approach “Choosing to Work During Retirement and the Impact on Social Security” 7 asking them Participation and Asset Allocat age at which they expect to retire have s to delay their retirem ion,” vol. 30, no. 11, Nove ent. hown little change between 2009 and 2010, the age at mber 2009) , staying in the work force which workers say they plan to re longer if medically able is likely to continue to tire has crept up increase. ward incrementally over time. In particular, the The survey also tested a total of percentage of workers who expect 19 possible incentives that m to retire after age 65 has incr ight eased over tim encourage retiring e, from 11 percent workers to By postpone retirem in 1991 to 14 percent in 1995, 19 percent in 2000 In conclusion, I would emphasize that ongoing effort ent. Four of these appear especially likely to be successfu , 24 percent in 2005, and 33 percent in the 2010 s to increase public atte l: ntion on the need to 2 RCS. save (see 1. Howe Half of retirees (48 percent) www.choosetosave.org ver, the retirement age reported by re ), and the “risk” of not ha indicate that feeling truly n tirees has changed even more slowly. In 1991, ving enough m eeded for an assignm oney to cover even ent would Dallas Salisbury basic expenses as longevity increases (see 19 percent of retirees said they re have been extremely or very tired at age 65 or later. This pe effectiv EBRI Issue Brief e in encouraging them no. 344, July 2010, “The EBRI rcentage has fluctuated over tim to delay their retirement. e Retirem and now stands at 32 percen Moreover, of those ranking this as one of th ent Readiness Rating t (Figure 30 on page 28 of :™ Retirement Income e top two m Preparation and Future Prospects” Issue Brief ost effective incentives, 72 per- no. 340). ), are President & CEO likely to s cent say it m lowly move all Am ight have prom ericans to re-think pted them to stay notions of retirem at least two m eo nt th re years with the com at became common in the pany. Employee Benefit Research Institute The RCS also finds that differences exist b period 1950 to 1984, but began to shift as em 2. Half of retirees with a defined benefit pe etw ploy een workers’ e ns ers like the Federal governm ion state receiv xpected ag ing a full pens e of retirem ent reduced the ion while ent and retirees’ actual age of retirem generosity of defined benefit pensions like CSRS working part time would have been effective ent. Just 9 percent of workers say th and m in delaying their retirem oved to base pensions like F ey plan to retire before age 60, ent (50 percent), ERS along com with defined contribution program pared with 31 percent of retirees who report and almost as many feel this way about rece s like TSP that they retired that earl rely upon individual action. iving a partial pension while w y. Nineteen percent of The private sector orking part www.ebri.org workers plan to retire at age 60–64, although 30 percen followed, and now state and local governm time (44 percent). Seven in 10 of those ra ents are ting each am beginn t of retirees retired at these ages. On the ing to consid ong the top two most effective er the same transition in other hand, 24 percent of workers (com greater numbers. incentives report they would lik EBRI’s Databook on Employee Benefits ely have stayed at leas pared with 8 percent of retirees) plan , “Chapter 4: P t two more years if it had been articipation in to wait at least until 3 Em age 70 to retire, and 9 percent i ployee Benefits” offered to them provides data on the trends in par (72 percent for full pensi ndicate they will never retire. on, 71 percent for partial pension). However, ticipation rates in defined benefit and defined contribution plans in the private sector this would necessitate a change in federal law and severa as well as state and local governm l other compensation-related ents. My mother and father retired in 1978 One reason for the d incentives ma ifference between workers’ y be almost as com at the height of the “old” re pelling. expectations and re tirement value proposition. Both tirees’ experience of lived to jus retirem 3. e Thirty nt age is that m t short of -eight percen 94 a any Am nd enjoyed the best of t repo ericans find rt that being able themselves retiring unexpectedly. The RCS has what I be to work seasonally or on a contract basis lieve will come to be viewed by history as the “golden age” in U consistently found that a large pe would have been effective in encouraging th S history for “retirem rcentage of retirees leave the ent.” W em orking to older ages, if physically able, is to delay retirem work force earlier than planned ent. Among those rating 4 here to stay and the numbers wi (41 percent in 2010). this as one of the top two Many retirees who retired ll do nothing but increase. And incentives, more earlier than planned c than three-quarters ( added increases in the age of ite negative reasons for 77 percent) say it might Social Secu leaving the work force before they expected, incl have prom rity eligib pted them ility for fu to stay two years or m ll benefits will serve to accelerat uding health problem ore with the com e and rein pany. s or di force that trend as the sability (54 percent), value of age 62 Social S changes at their company, such as downsizing or ecurity benefits continues closure (26 percent), and having to care for a to decline. EBRI research has also looked spouse or another family membat the degree to which added y er (19 percent). Others say changes in th ears of work would affect the e skills required for their probability of not running short of money. job (16 percent) or other work-related reasons (11 per EBRI Issue Brief cent) played a ro no. 297, Septem le. Som ber 2006, e retirees mention “Measuring Retirem positive reasons for retiring early, su ent Income Adequacy: Calcu ch as being al bating Rea le to affolis rd an ear tic Incom ly re e Replacem tirement (24 percen ent Rates,” t) or found that th wanting to do e retirem something else (14 p ent replacement rates n ercent), bu ece t ju ### sst 5 perc sary for a specific probab ent offer only positiv ility of success in e reasons. having enough m oney in retirement to pay for basic expenses and uninsured health care costs The views expressed in this statement are solely those of Dallas L. Salisbury and should not be attributed to the jum Empp considerably if one takes Social Security loyee Benefit Research Institute (EBRI), the EBRI Edu at the earliest age of e cation and Research Fuligibility of 62. For a 50–50 nd, any of its programs, officers, trustees, sponsors, other staff, or any other individual or organization. The Employee Benefit Research Institute is a chance of having enough money to cover these expenses in retirement, the minimum required 1 Page 27. nonprofit, nonpartisan, education and research organization established in Washington, DC in 1978. The testimony replacem 2 ent rate would be 64 percent; for a 75 percent chance of success, the minimum required Figure 29 on page 28. draws heavily from research publications of the Employee Benefit Research Institute, but any errors or 3 6 See Figupage re 31 15 onfor a s page 2 u9 mmary of the im . pact of various retirement ages on replacement rates needed. misinterpretations are those of the witness. 7 4 5 Figu Figu See Fi r re egu 4, 32 re 2 o p on ag pag e 17 n page e. 30 . 15. Employee Benefit Employee Benefit Employee Benefit Research Institute, T-165 Research Institute, T-165 Research Institute, T-165