Working Longer Will Not Save You Social Security

Moody’s has added its voice to the chorus of financial caution, joining major rating agencies to reiterate a concern many are already aware of: The US is facing a debt crisis. As the House pushes forward with President Trump’s extensive legislative package, which includes tax cuts and deregulation, the focus in Washington has shifted back to the issue of fiscal sustainability.

Enter the usual narratives. The primary concern isn’t about soaring defense budgets, corporate subsidies, or interest rates. It centers on social security. Once again, the solution appears simple: Americans should retire later.

This stance, highlighted by Bloomberg’s Allison Schrager, suggests that our real issues stem from early retirements. She proposes raising the minimum retirement age from 62 to 65 to help bolster solvency and lessen the burden on the trust fund.

It sounds reasonable, but, honestly, it misses the mark.

The Timing of Retirement Isn’t the Core Issue

Social Security operates differently than many government programs. It’s not funded by general income or debt; rather, it’s a transfer system—current workers support current retirees. Thus, the real question isn’t when people retire, but whether those still in the workforce can generate enough output to sustain them.

Money can distract from this reality. It’s more useful to think in terms of productive capacity. Reducing the purchasing power of today’s workers via payroll taxes, while enhancing benefits for retirees, changes the dynamics.

If the US economy can produce enough, it could support those who retire early. If not, forcing people to work until they drop won’t solve the problem.

Focusing too heavily on the “solvency” of the trust fund is misguided. You might push the retirement age up, but you could still face significant challenges if productivity growth falters or if the future workforce isn’t robust enough. Moreover, a strong economy might permit generous benefits even at an earlier retirement age. The true variable here is economic strength.

Longer Working Years May Not Help

Even if we could convince millions of Americans to work longer, the reality might not be as positive as it seems. Many who retire at 62 are enjoying leisure in places like Naples when they could still contribute meaningfully to the economy. Often, they leave jobs due to health concerns, ageist workplace dynamics, or simply because their industries are contracting. So many older workers find themselves in low-wage, low-productivity roles, often part-time. Asking them to extend their working years likely won’t reshape national productivity.

In essence, the promise of improved fiscal health through delayed retirement seems mostly unrealistic. At best, it might yield slight contributions for low wages. At worst, it could lead to diminished lifetime earnings for those already struggling. Essentially, this approach attempts to tackle the problem by encouraging retirees to spend less.

Real Solutions: Growth and Demographics

Two authentic pathways could lead to sustainable social security.

First, we must foster increased productivity. This could involve revitalizing the US economy by reshoring production, enhancing infrastructure, investing in energy, and raising wages. More productivity from each worker would allow the system to function even with earlier retirements.

The second, and perhaps more crucial aspect, is reshaping our demographic landscape. The long-term challenge extends beyond financial issues; it pertains to societal structure. The nation is aging, and there are too few young people choosing to marry and have children. A national strategy is essential to support family formation. Policies that make it easier to start families, buy homes, and raise kids in stable communities are crucial.

This isn’t about idealistic visions. It’s simple arithmetic. A nation with increased productivity and a growing population can support its retirees. Conversely, stagnation in productivity and declining birth rates will create challenges.

Some Misguided Strategies Persist

The persistence of proposals like Schrager’s—similar to Paul Ryan’s former suggestions on “working longer”—reflects a technocratic viewpoint. It may seem like a significant structural reform, targeting major budget items with accompanying charts.

But, frankly, that doesn’t address the right issue. There’s no need to tinker with retirement age. Instead, we should focus on cultivating an economy capable of upholding the commitments already made.

It’s like trying to balance a budget by asking warehouse workers to extend their hours; we need to genuinely assess what it takes to support the country.