Speaker 1: In fact, there wasn't even really a concept of retirement
Speaker 1: for most of human history. People are just work until
Speaker 1: they quote high And Welcome back to Bloomberg Benchmark, a
Speaker 1: show about the global economy. I'm Daniel Moss, Executive editor
Speaker 1: for Global Economics at Bloomberg News in New York, and
Speaker 1: I'm joined today in the studio by our guest host,
Speaker 1: Kate Smith, who's an editor at Bloomberg covering college endowments.
Speaker 1: Thanks Dan, and so today we're gonna be talking about
Speaker 1: the retirement age and kind of all about it. So
Speaker 1: it's historically been sixty five, but it's been inching higher,
Speaker 1: and we wanted to talk about this piece that Peter
Speaker 1: coy wrote. Um In that article, Peter wrote about this
Speaker 1: really interesting working paper from the National Bureau of Economic Research,
Speaker 1: and in that it says that on average, a lot
Speaker 1: of Americans are actually healthy enough to work past their
Speaker 1: sixty five birthday and that has the normal was economic implications,
Speaker 1: and Kate, the political implications are not small either. I mean,
Speaker 1: of course, you also have the not so nice question
Speaker 1: that even if Americans can worse pacts sixty do employers
Speaker 1: actually want them so to do all of those things?
Speaker 1: We actually brought into the studio Peter Coy. So, Peter,
Speaker 1: thanks for joining us. Thank you. Peter is Um, the
Speaker 1: Business Week's economic editor and the author of this piece.
Speaker 1: So Peter, I'm a little younger than you, but a
Speaker 1: little older than Kate. I have it in my mind
Speaker 1: that sixty five is this magical benchmark, but you're about
Speaker 1: to tell us it's not, and that it's moving all
Speaker 1: the time. First of all, when it's sixty five, come
Speaker 1: from UM. Sixty five is where the retirement age, the
Speaker 1: normal retirement age has been since social Security was started
Speaker 1: in the nineteen thirties and during the Great Depression and
Speaker 1: uh in the social security reforms that were intended to
Speaker 1: stabilize the finances, they said, okay, we've got to raise
Speaker 1: it in stages to sixty seven. So I'm fifty, My
Speaker 1: my standard normal timement age is going to be sixty
Speaker 1: six and a half. Now, that doesn't mean I can't
Speaker 1: retire earlier than that. I could start collecting benefits at
Speaker 1: sixty two the early retirement as as the earliest check
Speaker 1: can get them. If I do that, I'm gonna get
Speaker 1: less money per paycheck. And I can also retire later
Speaker 1: and get bigger benefits per check if I wait till
Speaker 1: like sixty eight or something, and they try to do
Speaker 1: it to make it actuarily fair, so your lifetime benefits
Speaker 1: will be the same no matter when you retire. And
Speaker 1: the sixty number, though, where did that come from? You know?
Speaker 1: Prior to Social Security, well, um, there had been various
Speaker 1: state and private pension systems that had kind of locked
Speaker 1: onto either sixty five or seventies. So it was a
Speaker 1: little bit of a choice, well which one should we
Speaker 1: go with? And I don't know who's FDR or Congress
Speaker 1: settled on sixty five. There's a myth that it goes
Speaker 1: back to Otto von Bismarck, the first Chancellor of United Germany,
Speaker 1: who it's true that under Bismarck, Prussia and Germany did
Speaker 1: have sort of the world's first public pension system. But
Speaker 1: contrary to the myth at the age, there was seventy
Speaker 1: when it started, and later after Bismarck died, it was
Speaker 1: lower to sixty five, and that's why it sticks in
Speaker 1: people's minds. So wait a second. We owe the social
Speaker 1: Security system in the United States to the iron Chancellor,
Speaker 1: the iron consular Yes, really, I mean, you can't say
Speaker 1: it it's one person because after Germany, then Britain had one,
Speaker 1: and then as we said, there were green shoots. There
Speaker 1: were different kind of pension systems in the US, but
Speaker 1: so security really changed. Everything was a huge program, and
Speaker 1: so it's a bedrock of American security today. I was
Speaker 1: doing a little research on that sixty and I found
Speaker 1: out this really funny rumor that apparently was going around
Speaker 1: the time of when Bismarck was around, and apparently the
Speaker 1: rumor was that they turned it into six because that
Speaker 1: was when Bismarck himself wanted to retire, but that that
Speaker 1: ended up being false, but that was apparently the rumor
Speaker 1: at the time that was going around. But you know,
Speaker 1: back when or seventy, whichever the choice was, when those
Speaker 1: are being put in, average life expectancy was much lower
Speaker 1: than it is now, so people tended to have quite
Speaker 1: short retirements. In fact, there wasn't even really a concept
Speaker 1: of retirement for most of human history. People would just
Speaker 1: work until they croaked. I think croaked is a technical term,
Speaker 1: right dan um cold term for death, or until they
Speaker 1: just were completely incapacitated um, in which case they'd just
Speaker 1: be lift in the field pretty much. And my article
Speaker 1: talks about this new research at Kate mentioned the National
Speaker 1: Beer of Economic Research has run a couple of papers
Speaker 1: recently with data which is really nice. It's really good
Speaker 1: news that Americans are living longer a but also be
Speaker 1: healthier lives. So it's not only that you're you're alive
Speaker 1: at say seventy, but you you can still work. So
Speaker 1: the headline ahead on the article at one point was
Speaker 1: admitted you could keep working at seventy. You know, if
Speaker 1: you can golf eighteen holes under the broiling hot sun,
Speaker 1: presumably you can sit for eight hours at a desk.
Speaker 1: And you get into this in your article. But has
Speaker 1: the system around which this whole concept of retirement and
Speaker 1: social security and all the infrastructure that's been built up
Speaker 1: around it, has it caught up with this ability to
Speaker 1: work well past seventy that you're describing. Well, the move,
Speaker 1: the gradual, incremental move from to sixty seven was a
Speaker 1: step in that direction, but the people are saying we
Speaker 1: can go past that. You could go to seventy or something. Now,
Speaker 1: this art's getting into some sticky stuff, which is like
Speaker 1: if you have a job, you know, doing podcasts on
Speaker 1: the radio, then it's really not physically strenuous work except
Speaker 1: for maybe your vocal cords, and so you could work
Speaker 1: easily to seventy. But if you have a job digging
Speaker 1: ditches or working on an assembly line, or changing beds
Speaker 1: in a hotel, or waiting tables or flipping burgers, there
Speaker 1: are a lot of jobs that are physically demanding, and
Speaker 1: uh they also tend to be the lower paying jobs.
Speaker 1: I mean NFL and NBA being exceptions. So the very
Speaker 1: people who are getting less money for their work are
Speaker 1: also in jobs that are harder to do at older ages,
Speaker 1: so they have less desirable work and um, for them,
Speaker 1: going to seventy truly would be a hardship. So we
Speaker 1: really haven't figured out a way to deal with taking
Speaker 1: advantage of the greater health and longevity for the most
Speaker 1: of the population for fixing source securities finances without imposing
Speaker 1: undue burden on the low income generally low income segment
Speaker 1: of population. And as you mentioned your piece, the way
Speaker 1: social security works is it's not kind of I mean,
Speaker 1: I'm sorry, it is black and white. Either you are
Speaker 1: not working or you are. There's no kind of there's
Speaker 1: no gradient to it, and right, and the disability system
Speaker 1: works the same way because the disability income is a
Speaker 1: component of social security. You don't have to you can
Speaker 1: get at any age. But it's just like that, you
Speaker 1: have a whole determination about whether you are well enough
Speaker 1: to work, and if you are, you don't get the benefit.
Speaker 1: The benefit is a percent or zero. And so it's
Speaker 1: really a cliff effect. Because it's a cliff effect, it
Speaker 1: tends to cause a lot of debate, you know, and
Speaker 1: and argumentation. It's to strenuous for both sides, both the
Speaker 1: applicant and the government. And so how would you there's
Speaker 1: no One of the ideas I had was okay, well
Speaker 1: there should be a way where okay, if you, if
Speaker 1: you if you are one of these people who has
Speaker 1: a physically strenuous job, then we'll keep we'll have the
Speaker 1: retirement age at seventy, but you can just apply for disability.
Speaker 1: And the problem is that just turns out to be
Speaker 1: a huge administrative headache. Is no way he wants to
Speaker 1: go through that. In addition to the ability to work
Speaker 1: for longer. Don't people have to work for longer now
Speaker 1: because they're going to be around for a greater period
Speaker 1: of time, they need to maintain their house. Then when
Speaker 1: it gives some money to their grandchildren. They want to
Speaker 1: do all these things I make. People need the money.
Speaker 1: It's not just about being physically or intellectually able to
Speaker 1: do it. There's a necessity, there isn't there. So think
Speaker 1: about that. We're gonna get you on that in a second.
Speaker 1: But first I have a question might reflect the fact
Speaker 1: I was born outside the United States. People here this
Speaker 1: term the third rail. Social Security is the third rail,
Speaker 1: But help me out what is the first and what
Speaker 1: is the second? So this is a subway analogy. Actually, Um,
Speaker 1: so you know you're standing on the subway platform. You
Speaker 1: look down, you see three rails. The first two are
Speaker 1: what the car actually runs on, and then the third rail.
Speaker 1: And if you look closely, the third rail is actually
Speaker 1: much thicker. It's kind of like it almost looks like
Speaker 1: it's like a box, long box, and it actually encases
Speaker 1: all of the electricity that uses to run the subway line.
Speaker 1: So the idea is that if you touch it, you'll
Speaker 1: like just like instantly die. It's horrible. And then and
Speaker 1: everyone says, like if you hapen to fall in the
Speaker 1: subway or something like that, like something atrocious, you should
Speaker 1: never like go to the wall of the subway. You
Speaker 1: should try to get in the middle of the tracks,
Speaker 1: because if you touch the third rail, no matter what,
Speaker 1: you will die. And an analogy invented just for social security,
Speaker 1: I think people use it for all, like like really
Speaker 1: hot button political things, you know, like if you touch it,
Speaker 1: you're like, your dad is a politician. If you're like,
Speaker 1: you know, a Republican and you want to start talking
Speaker 1: about I don't know, some sort of like progressive social
Speaker 1: thing third rail, right, Like, you touch it, your dad? Okay,
Speaker 1: that's helpful, you know, Peter. We hear a lot about
Speaker 1: people having to go back to work after they've retired
Speaker 1: because they've realized not only are they healthy, they didn't
Speaker 1: put away enough. Now we've all heard these stories, the
Speaker 1: burg of Flipper and so on. How does that feed
Speaker 1: in to the guts of your story in bloom Book
Speaker 1: Business Week. Well, first of all, you don't have to
Speaker 1: retire at any age, and people are free to work
Speaker 1: till past a hundred if they want to. What we're
Speaker 1: talking about here is mostly what's the normal retirement age,
Speaker 1: which is the son of the sweet spot for your benefits,
Speaker 1: And it turns out lots of people take this normal
Speaker 1: retirement age is almost like the spected retirement. So if
Speaker 1: you just look at the peaks and troughs of when
Speaker 1: people retire, there's a big jump at sixty two, which
Speaker 1: is the earliest you can get social security, and that
Speaker 1: hasn't changed, by the way, when the normal went from
Speaker 1: and then you get another one whatever the normal retirement ages.
Speaker 1: And so there's little bit of a social expectations component
Speaker 1: to this. The government is kind of molding people's behavior
Speaker 1: just by what it sets for its these numbers. But
Speaker 1: don't you think of like sixty two and then sixty
Speaker 1: five as well as these is kind of like mental
Speaker 1: finish lines, and especially for you know, these jobs that
Speaker 1: we're talking about, the you know, the grocery bagger, the
Speaker 1: burger flipper. I mean, if you're doing a job like that,
Speaker 1: you have to have a finish line. You probably did,
Speaker 1: you see what I'm saying that to take away that
Speaker 1: finished line, I'm sure would be difficult to move the
Speaker 1: finish line exactly when you're in the race. When you're
Speaker 1: already in the race. Why they didn't move up the
Speaker 1: sixty two. It kept a sixty to do where it
Speaker 1: was for all those people who just you know, we're
Speaker 1: just dying and dying to get to when they as
Speaker 1: soon as they can get a sort of security check. Interesting. Yeah,
Speaker 1: so why doesn't Congress just go ahead and mandate a
Speaker 1: new retirement age of seventy and simultaneously make it easier
Speaker 1: for people who have physically demanding jobs to go on
Speaker 1: disability at say sixty five. Why don't they just do that? Well,
Speaker 1: it is a possibility. As I said before, one of
Speaker 1: the problems is just the sheer administrative headache of trying
Speaker 1: to figure al who's disabled and who's not. That would
Speaker 1: be to be it would just flood the system. But
Speaker 1: they could readefine it right, you had a physically demanding job, right,
Speaker 1: So then it would be by career, which is yet
Speaker 1: another idea. And that's not easy either, because you can
Speaker 1: imagine the Gamesman chip of everybody trying to say, oh,
Speaker 1: my job is physically demanding, I want that included. And
Speaker 1: so the Greeks had have no lary elaborate system of
Speaker 1: uh wait a second, where emulating the Greek economia, Well,
Speaker 1: that's that's yours. They're over like five hundred job titles
Speaker 1: in Greece that were labeled owners or physically demanding, including
Speaker 1: like hairdressers, and radio technicians and so on. That's nothing
Speaker 1: about the radio technicians, but I'm just saying, and the
Speaker 1: people retire at age fifty. That got a little bit ridiculous. Okay,
Speaker 1: So we've got Greek hair dresses and the Iron Chancellor
Speaker 1: all helping shape just debate on social security for time
Speaker 1: in the US. Yeah, it's bizarre. And like you said,
Speaker 1: it really is the third rail though, because like as
Speaker 1: a politician, and we talked about like the the mental
Speaker 1: idea of a finish line. If you're in one of
Speaker 1: these jobs, I mean, you're not going to get voted
Speaker 1: in again. If you want to tell people actually you're
Speaker 1: going to work another eight years, you have to. Okay,
Speaker 1: you were saying before that you you you're younger, you
Speaker 1: didn't actually expect so security to be there for you
Speaker 1: when you retire. I don't. I don't know if that
Speaker 1: makes me sound like a huge, huge cynic though, Um no,
Speaker 1: I don't. I mean, and I think a lot of
Speaker 1: people in my age don't as well, which is why people,
Speaker 1: you know, we really take our four oh n K
Speaker 1: seriously and you know, trying to contribute as much as
Speaker 1: you can do that because you don't expect there to
Speaker 1: be this kind of little safety net for you when
Speaker 1: you get there. So for your generation, it's not really
Speaker 1: the third royle, I guess not. I think like for me,
Speaker 1: if I heard a politician saying that they want to
Speaker 1: change the retirement age for someone who is my age,
Speaker 1: it wouldn't make a difference to me. I think it
Speaker 1: would just kind of be in one year out the other,
Speaker 1: and then I listen to all their other platforms. But
Speaker 1: if they want to tell someone who's fifty five, actually,
Speaker 1: instead of working for another seven years, let's assume they
Speaker 1: were retiring at sixty two, No, you have to work
Speaker 1: for another fifteen years. That's I don't know. That just
Speaker 1: seems unfair for just to make it simple, that would
Speaker 1: be difficult to stomach. I would imagine if I were
Speaker 1: fifty five years old and someone was telling me you
Speaker 1: have to actually work double what you thought you had, Right,
Speaker 1: you know, there's no shortage of elected officials who will
Speaker 1: tell us that at some point quote entitlements unquote have
Speaker 1: to be quote reformed unquote, and social securities generally the
Speaker 1: main thing they're talking about there. But does it have
Speaker 1: to be well? Has something has to happen? Even the
Speaker 1: kind of the liberal interest groups that are rigorously defending
Speaker 1: social security and that are mistrustful of raising retirement age
Speaker 1: because they see it correctly as a benefit cut, do
Speaker 1: think something needs to be done. And the usual debate
Speaker 1: is how much of the change should occur in the
Speaker 1: cutting benefits versus increasing revenue. And if you do increase revenue,
Speaker 1: should it be entirely from within the system, i e.
Speaker 1: From people's wages or could you draw on a bigger
Speaker 1: pool of money? And there are many options you can
Speaker 1: think of their you know, transactions, financial transaction tax or
Speaker 1: capital gains tax or something like that to to kind
Speaker 1: of get the bigger pot of money that's out there
Speaker 1: in the economy. Interesting, So what's the next chapter in
Speaker 1: this story? I think that we're coming up on. I
Speaker 1: think every year that tweaks a little bit. But the
Speaker 1: the trust fund is going to run out in twenty
Speaker 1: thirty six or seven, and at that point the only
Speaker 1: money the system will have is the money that's coming in,
Speaker 1: which covers only about three quarters of benefits. And well
Speaker 1: before that they're gonna have to come up with another
Speaker 1: tweak to Social Security because there's no way we're gonna
Speaker 1: just like cut benefits by a quarter, So I think,
Speaker 1: who knows, maybe in the next presidential administration they're gonna
Speaker 1: have to start revisiting this. Is it possible to even
Speaker 1: live on Social Security like people? I can imagine it
Speaker 1: would be tough. Here in New York City people do Dan.
Speaker 1: It's it's a musing how many I wish I had
Speaker 1: the percentages of my fingertips. But as a substantial percentage
Speaker 1: of Americans who have no pension, private pension and no
Speaker 1: retirement savings and social Security is there primary means of
Speaker 1: support and they are able to live a decent life
Speaker 1: on that, you know, a penurious life. Interesting. I mean
Speaker 1: one thing I also find interesting about you know, if
Speaker 1: you want to talk about changing retirement benefits, as you
Speaker 1: look at state and city pension systems, you know, their
Speaker 1: public pension systems, you know, kind of a local version
Speaker 1: of Social Security, if you will. And you've seen a
Speaker 1: few court rulings that actually really benefit retirees, um like
Speaker 1: more so than actually the law would necessarily UM agree with.
Speaker 1: Great example is Detroit um in that bankruptcy settlement, those
Speaker 1: pensioners got about eighty seven cents on the dollar. Well,
Speaker 1: you saw some bondholders who were legally above pensions like
Speaker 1: they were, there was no question about it. I mean,
Speaker 1: some walked away with nothing right. I think that reflects
Speaker 1: the public's perception that it's really hard to just leave
Speaker 1: people in the lurch. But I also think it reflects
Speaker 1: a complete inability to predict what can happen with benefits
Speaker 1: and when it's really you know, someone's life in the line.
Speaker 1: You know what you're talking like, can you really survive
Speaker 1: on what's currently Social Security is? And I think to me, anyway,
Speaker 1: when I'm looking at social Security, seeing rulings like in
Speaker 1: Detroit really make you realize that it's impossible to predict
Speaker 1: what you can do because even if you know every
Speaker 1: law about this, who's to say, you know, emotions won't prevail.
Speaker 1: You know, a lot of people talk about working longer
Speaker 1: because they need the money to retire. And then and
Speaker 1: they do surveys, so they ask people every year do
Speaker 1: you expect to retire with the next year, and the
Speaker 1: answer we no, no, no, And then one year to
Speaker 1: say do you expect to retire the next year and
Speaker 1: they say, oh, I already retire last year. It happens
Speaker 1: amazingly abruptly for a lot of people. A spouse gets sick,
Speaker 1: you get sick, change at work, and suddenly you're out
Speaker 1: of the You're out of the workforce. Okay, so then
Speaker 1: let me ask you the obvious question. You guys are
Speaker 1: a little bit older than I am, when do you
Speaker 1: guys plan on retiring? Well, I have a five month
Speaker 1: old daughter in addition to a teenage son, so I'm yeah,
Speaker 1: never is a pretty good estimate. Great, sorry to hear that,
Speaker 1: But don't you well, I shouldn't say this because I
Speaker 1: just finished saying that you shouldn't allow, you know, random
Speaker 1: numbers picked out of the government to determine your thinking.
Speaker 1: But six or six and a half says the economist
Speaker 1: will come record an episode at your beach house, Peter. So,
Speaker 1: in all seriousness, thanks for joining us. Thank you. Benchmark
Speaker 1: will be back next week and until then, you can
Speaker 1: find us on the Bloomberg terminal and Bloomberg dot com,
Speaker 1: as well as iTunes and Stitcher. While you're there, take
Speaker 1: a minute to rate and review the show so more
Speaker 1: listeners can find us and let us know what you
Speaker 1: thought of the show. You can talk to Dan and
Speaker 1: I on Twitter. You can find Dannet at Daniel Mass
Speaker 1: d C and you can find me at by Keith Smith.
Speaker 1: And our guest Peter is on Twitter at Peter Coy,
Speaker 1: and don't forget to check out the article he's written
Speaker 1: about this. We'll see you next week.