“They would be able to claim Social Security retirement benefits early, as many do now, and with a smaller financial penalty than that imposed today. At the same time, high earners would pay a larger penalty than they do today for early claiming.”
This would encourage higher earners, who usually experience better health and can work longer, to stay in the job market. Such a move would not lower the number of jobs available to younger workers because the job market is flexible enough to expand to accommodate a larger pool of workers. “Just as developed economies were able to absorb the influx of women into labor markets in the 1970s, so they can absorb a new group of older workers,” she says.
Secondly, Social Security should provide an option for those who want to gradually withdraw from the job market.
“Today, most retirees do not permanently exit the workforce all at once. Instead, they cut back their hours, take a less-demanding position, or try a new job. To recognize and facilitate these shifts, the Social Security system should offer three years of half-benefits beginning at age 73, without any reduction in full benefits payable at age 76,” she says. ”This would ease the transition to a higher retirement age.”
Disability and employment policies should be reformed to protect the interests of older workers. The government should create additional backstops to protect older workers who find that they cannot work until 76. “Feasible changes in Social Security Disability Insurance and unemployment insurance, along with better age discrimination protections and changes in employment law would all anticipate the needs of a new, older workforce,” she says.
Alstott recommends the gradual repeal of the spousal benefit because it will be far less important to future generations, as more and more spouses collect benefits based on their own earnings record rather than their spouses’ earnings record.
Instead, “I suggest a joint-and-survivor annuity option for people who wish to stretch their Social Security benefit to support themselves and a spouse, partner or dependent child. Importantly, though, retirees choosing the joint-and-survivor option should pay the full actuarial price for their benefit,” she says.
Finally, tax provisions related to retirement should be redesigned to serve the interests of the disadvantaged, she says. Progressive reform should restructure the Social Security financing system to include an equitable tax burden on income from capital.
Alstott says the savings that would be achieved by raising the retirement age and phasing out spousal benefits would be far larger than what would be needed to pay for increased Social Security Disability Insurance and unemployment insurance.
Alstott acknowledges that politicians and many policy makers propose less dramatic reforms and a more piecemeal approach to change.
“I aim to take advantage of an academic vantage point to propose more ambitious reforms anchored to a moral foundation and spanning a wide variety of programs beyond Social Security,” she says. In the book, ”I provide principled reasons for rejecting the status quo and other proposed reforms, including means testing and longevity indexing.”
Inequality poses a moral challenge to American retirement policy, Alstott claims.
“When our laws reward lifetime privilege and compound lifetime disadvantage, something has gone badly wrong. Social cooperation in the past century has produced valuable gains in longevity and quality of life for the elderly, particularly those in the top half of the income distribution. We should not hesitate to revisit the public retirement system and to ask them to share some of those gains with younger age groups and with their less-affluent peers,” she says.