US employment: Retirement age

Employment The insurance giant American International Group Inc (AIG) CEO, Robert Benmosche has recently raised a concern that "Retirement ages will have to move to 70, 80 years old" in the context of ‘secure retirement’. The statement instantly instigated a debate among retirement experts who strongly supported the stance as they vowed that most people did not have enough retirement-savings and their incomes eventually reduce to almost half after retirement. Moreover, the ever increasing life expectancy, especially in the developed part of the world, drags the point further.

A very recent Gallup study on retirement trends over the years in the US divulged that a major proportion of Americans believe that they will have to retire at 67, up from 66 last year, 63 ten years ago and 60 in the 1990s. In the same light, a new Wells Fargo study revealed that around 30 per cent of middle-class Americans have a firm belief that they will need to work till their late 80s in order to retire comfortably. And, this trend seems quite logical in the context of improving health and life expectancy. As per US Census Bureau, expectation of life at birth has increased to 78.3 years in 2010 from 73.7 years in 1980 and is expected to touch 80 years by 2020.

Considering higher life expectancy, if retirement age gets elevated, then it is going to directly affect unemployment rate. As per 2011 US Census Bureau estimation, more than 13.3 per cent of the total population is over 65 years old which implies that US will experience 4-5 million new retirees each year for the next 15-20 years at the current retirement age. Thus, if retirement age is upgraded to 80 years then American job market may see a slowdown – as around five million jobs which could have been offered to new graduates would be still served by old employees. The current scenario of employment is still bleak in the US with 12.3 million Americans still hunting for jobs – the worst unemployment scenario since Franklin Roosevelt (1933-1945). So, the fact is clear that if new job market is constant then five million unemployed people are going to be added to the list with increase in retirement age.

Even in the US Presidential Election Campaign 2012, retirement age has played a pivotal role. Both Barack Obama and his counterpart, Mitt Romney have expressed their views to increase retirement age. However, Obama's stances were varied over time. In 2007, he pointed out that "cutting benefits is not the right answer" and "raising the retirement age is not the best option" but recently he stated that he would cut social security by 3 per cent and increase normal retirement age to 69.
Now that Obama is coming to power, the US needs to be very cautious before taking any major decision. At the same time, it also needs to keep a close eye on the aspects of secure retirement and job scenario as enhancing retirement age will not only facilitate better future prospects for ageing people but will also affect severally the younger generation by snatching away more jobs. The US government must create more jobs if they want to enhance retirement age.