The way Social Security is structured, its biggest beneficiaries are those who live longest. Guess who that happens to be: wealthy retirees.
Take a look at life expectancies. According to the Brookings Institution, of people who reach age 50, women in the top 10 percent of the income spectrum live 6.4 years longer than women in the bottom 10 percent. The gap is even larger for men: 8.7 years.
So it was no surprise to see Neil Irwin write in the New York Times that “the progressive ideal built into the design of Social Security is, gradually, being thwarted,” because the life expectancy gap between high- and low-income retirees is growing. “In some circumstances, the program can actually be regressive, offering richer benefits to those who are already affluent.”
Irwin gives the following example: “For American men in the top 1 percent like our Mr. Moneybags, 87 really is a typical life span… Alas, a gardener earning $30,000 a year is unlikely to live that long. Men in that income tier die, on average, at age 78. In this hypothetical case, that nine-year gap in expected life span radically shifts the relative financial return the two men would receive on their tax dollars.”
If the gardener did manage to live until age 87, he would get $115,000 more in Social Security benefits.
As Irwin writes, “The people who die unusually young subsidize those who live unusually long lives.” That means low-income retirees, who paid payroll taxes throughout their careers, get less out of the system than wealthy retirees who live longer.
Worse, if you die before collecting any Social Security benefits, you get nothing for all the payroll taxes you paid throughout your career.
Social Security’s retirement trust fund is projected to run out of funds in 2035. At that time, all benefits will be automatically cut by about 20 percent. The system would only be able to pay out as much as it immediately receives in revenue.
Jason Russell is a commentary writer for the Washington Examiner.
Percent Surviving by Age, Gender & Race in the US: HealthGrove
