It’s hard to say what was the point of CNN Money’s latest contribution to the retirement debate. The site’s Q&A with Stanford University psychologist Laura Carstensen, called “It’s time to rethink retirement,” did little to clarify for its audience the serious issues surrounding Social Security and retirement that lie ahead. And it ignored fiscal realities many of the elderly face now and will face in the future.
CNN Money—jointly produced by CNN, Fortune magazine, and Money magazine—calls Carstensen, who heads Stanford’s Center on Longevity, “one of the nation’s top researchers on aging.” Perhaps, but she throws out a lot of glib generalities about aging and retirement without any backup. Which studies? When were they done? How did they place in the universe of other similar studies? Readers get a lot of Carstensen opinion, but she’s no expert when it comes to Social Security. Perhaps psychology and the financial nitty-gritty of social insurance don’t mix.
CNN Money’s Donna Rosato asked Carstensen if people can afford to retire early—a fair question.* Carstensen didn’t really answer it, replying “we must overcome the inclination to view old age as bleak. People who look forward to these years are more likely to save.” She talked about making an emotional connection “to your future self,” adding that “those who saw their aged selves saved twice as much as those who didn’t.”
OK. But we wondered: What if someone worked at a low-wage or average-paying job and couldn’t save? What if stagnant wages, rising healthcare costs, rising tuition and childcare, etc. got in the way—not to mention job loss, health problems, or divorce. What if looking at your aged self reveals there just won’t be enough money? According to recent data from the government’s Survey of Consumer Finances panel study 2007-2009, the median retirement account balance for households nearing retirement (ages 55-64) was $86,000 in 2009—down from $104,000 in 2007. It might have helped had the reporter asked Carstensen about those scary numbers.
CNN Money’s writer did say that although “many people intend to work past 65, half of current retirees left the workforce earlier due to poor health or layoffs.” Carstensen fires back that “more people over 55 are employed than ever, and 88% of people 65 to 74 are healthy enough to work.” Who says? Backup please!
“We shouldn’t conflate the problems of today’s economy with the potential for working longer,” Carstensen adds. But problems of today’s economy are quite real. The other day the HuffPost Hill shared a case in point, telling the story of a TV engineer who got laid off before his 63rd birthday and had to take a reduced Social Security benefit of $1700, which he says will allow him and his wife to “remain just above the poverty line.” For the last two years he has searched for work, sending out more than 300 applications. He has yet to get an offer. If there are no jobs, where are people going to work? Carstensen’s answer: They could become mentors or start businesses. The interview didn’t note that mentoring jobs usually don’t pay, or that if people use money for a start-up that goes bust—as most start-ups do—where will they be financially?
Carstensen admitted she was no expert on public retirement programs, but she did have ideas. One of them: Make people wait until age 80 to collect full Social Security benefits, while keeping the early retirement age at 62, “since we need to support those too sick to work.”
That suggestion was so far off the wall I consulted a real expert on Social Security, Paul Van de Water at the Center on Budget and Policy Priorities to help address it. He told me he hoped “the author of the proposal would rethink it if he/she understood what it did.”
Van de Water explained that as the full retirement age gets higher, the age for early retirement should also be increased, to keep people from taking a highly reduced early retirement benefit that may not support them through the years.
Today, workers retiring at 62 whose full retirement age is 66 receive 75 percent of their full benefit.Those whose retirement age for full benefits is 67—which, under current law, it will eventually be for everyone—receive 70 percent of their benefits at 62.
If the retirement age for full benefits was raised to 70, as some are advocating, workers who take an early benefit at age 62 (assuming the law still allows them to do that) would receive only about 57 percent of what they would have receive at age 70, according to Van de Water. “One can only imagine how small the age 62 benefit would be if the full retirement age were increased to 80,” he said.