Long retirements strain Social Security

Bill Mossman, 78, stopped working at 62. He's had a joyous retirement — traveling, studying, working out three times a week and assembling a giant collection of historic jazz recordings.

Social Security's early retirement age made it all possible. "I took Social Security benefits right away. We wanted to travel and needed the cash flow," says Mossman, who worked for 39 years as an engineer and manager at an electric utility in Madison, Wis., where he still lives.

The golden age of retirement is in full bloom in the United States. Seniors are healthier, wealthier and more active than ever. Americans are retiring earlier — half retire at age 62 — and living longer.

That's the problem, at least for Social Security.

Early retirement and longer lives have placed an enormous burden on the federal government's national retirement program, threatening the long-term solvency of Social Security. The upcoming retirement of 76 million baby boomers — those born from 1946 to 1964 — has made the issue of long retirements especially urgent. The first wave of boomers turns 62 in 2008.

As President Bush begins his second term, he has put fixing Social Security's financial problems at the top of his domestic agenda for the next four years. His plan to let workers create private investment accounts from Social Security taxes seeks to generate higher returns to cover the costs of longer retirements. But it doesn't address the system's underlying demographic problem: People collect benefits an average of seven years longer than they did in 1960.

"If we're worried about Social Security's finances, we should be talking about the early retirement age, not privatization," says Jonathan Gruber, an economist at the Massachusetts Institute of Technology.

Raising the early retirement age is one of the key levers — along with tax hikes, benefit cuts and private investment accounts — available to Congress as it tries to bring the system into financial balance.

The government effectively established 62 as the official retirement age in 1961 when it lowered the Social Security eligibility age from 65 to 62 for men. It was lowered for women in 1956.

Everywhere in the industrialized world, people retire as soon as government benefits kick in. Fewer than 20 percent of people ages 60 to 64 work in France, Belgium and Italy, where the early retirement age is 60 or younger. In the USA, the percentage of men still working at 63 has fallen from 78 percent in 1960 to 48 percent today. Some of those work part time and collect Social Security.