Later Retirement, Inequality in Old Age, and the Growing Gap in Longevity Between Rich and Poor

Source: Barry Bosworth, Gary Burtless, Kan Zhang, Brookings Institution, 2016

From the summary:
The U.S. Social Security system, which established old age benefits, is designed to be highly progressive by redistributing income from workers with high average lifetime earnings to workers—and their dependents—who have low lifetime earnings.

Under the basic benefit formula, workers that make less over the course of their lifetime will see a higher percentage of their monthly earnings replaced through Social Security benefits than workers with high lifetime earnings.

The program is one reason America’s senior citizens, when taken as a whole, have fared so well—even throughout the Great Recession. While the average income (adjusted for inflation) of households with a head below the age of 65 fell by 4 percent between 2003 and 2013, the income of those with a head 65 and over rose by 15 percent.

But new research from Barry Bosworth, Gary Burtless, and Kan Zhang finds evidence that some of the program’s progressivity is being offset due to a growing gap in life expectancy between the rich and the poor.

That gap, when taken together with the rise in average retirement ages since the early 1990s, means the gap between lifetime benefits received by poor and less educated workers and the benefits received by high-income and well educated workers is widening in favor of the higher income workers.

Key findings on delayed retirement
Key findings on rising old-age inequality
Key findings on the growing gap in life expectancy between rich and poor