Health: Retirement's Wild Card

Article excerpt

Potomac Sources

There's an old Yiddish proverb that says, "Man plans, and God laughs." It applies well to work and retirement, and the uncertain hopes Americans have for both. A recent survey by Merrill Lynch says millions of Americans, worried about the size of their retirement nest eggs and the rising cost of healthcare, plan to stay on the job longer. They want to keep earning salaries, and, if they have health insurance on the job, to retain this highly valued benefit. Health coverage, though, is the wild card in the retirement hand.

Midlife and older Americans, particularly boomers, want to stay on the job, but they may not be lucky enough, energetic enough or healthy enough to do so. Cost-conscious corporate managers strive continuously to keep payrolls down, and management today doesn't welcome the thought of veteran workers spending 30 or 40 years on the job. Layoffs and buyout packages are increasingly common.


The vast majority of people, 70% or more, take their Social Security benefits in a reduced amount because they retire before the age of full benefits. They can begin drawing Social Security at age 62; indeed, most people take it during their 62nd and 63rd years. The reduction from the amount of full benefits is about 20%. The age for receiving full benefits is rising gradually; in 2005, it is 65 years, eight months. The historical pattern of people taking reduced benefits at an earlier age has been going on since early retirement benefits were offered under Social Security and shows little signs of changing, despite the professed desire by people in poll after poll to keep working.

People say they want to stay on the job, but often they don't. A key factor is health: Disability begins rising sharply when workers reach age 50. Among the population between ages 51 and 61, some 20% "have a health problem that limits the amount or kind of work they can do," according to a study by Robert T. Reville of the RAND Corporation and Robert F. Schoeni of the University of Michigan Institute for Social Research. Their study, titled "The Fraction of Disability Caused at Work" (Social Security Bulletin, Vol. 65, number 4), showed that disability levels for this age group were 20% for men, 21% for women. The figures varied among ethnic groups: 19% for non-Hispanic white men, 29% for black males and 27% for Hispanic men. Among women, the percentages were 19% for non-Hispanic whites, 28% for blacks and 28% for Hispanics.

Among those receiving disability insurance payments, 37% are disabled because of an accident, illness or injury at work. In today's service-driven and computerized economy, there are fewer coal miners, steelworkers, longshoremen and others in tough, physically demanding and often dangerous jobs that can lead to disability. The study noted that in the past 40 years, "the share of workers in physically demanding jobs has declined, which may reduce the importance of workplace injuries overall. However, the new occupations may be associated with a different set of health conditions, such as repetitive stress injuries, obesity and stress-indicted mental illness. In fact, the prevalence of disability among people ages 45 to 54 increased between the late 1980s and the late 1990s . . . a period during which policy change made it more difficult for injured workers to receive workers compensation."


But it is hard to get disability payments under the Social Security system because of a strict test. To get disability coverage, a worker must have a mental ailment or a physical disorder that makes it impossible to work for at least a year. That doesn't only mean working at one's particular career-it means people must be sufficiently disabled to do work of any kind.

Likely many workers who reach age 62 and feel physically tired or ill or simply unable to do their jobs will take early benefits under the Social Security program. …