The Role Of Labor Force Participation In Estimating Social Security Eligibility


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Increasing the normal retirement age by a year is politically popular with voters. However, increasing it by two years would yield a significant increase in life expectancy and so would be a wise investment. How much life insurance should one expect to receive if the normal retirement age is increased? This depends on a number of factors.

Not Directly Proportional To The Normal Retirement Age

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Life expectancy is not directly proportional to the normal retirement age. The rate of living increases as one ages but life expectancy does not keep pace with rising life expectancy. Thus, the average lifespan is somewhat longer than the expected life span. One might therefore wish to reduce his life expectancy earlier than usual in view of his increased longevity.

Health is not directly related to longevity but may play a role in determining one’s level of longevity. People with good health are less likely to suffer from chronic diseases or disability. Thus, the chances of a person remaining fit and healthy until he reaches the normal retirement age are high. The level of personal wealth also has a role to play in determining the level of longevity. Those who have full retirement benefits and are not worried about their financial situation stand a better chance of living longer.

One of the main reasons for people continuing to work well into their nineties and fifties is their good health. Good health ensures that people can maintain a regular and energetic lifestyle even as they age. Low levels of personal wealth do not directly affect one’s chances of longevity but may reduce his ability to enjoy the great satisfactions of life. Those who are solvent and confident of their ability to earn a full retirement benefit are more likely to live long.

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One important factor that affects the new benefit formula is the current state of the economy. Economic recessions have shown to be quite disruptive to workers nearing the normal retirement age. The duration of the recession and its duration is an important determinant of the benefits that would be paid out. Recession periods have been known to last anywhere from three months to two years, making the Recovery period in any case relatively short.

The unemployment rate is another important determinant of the amount of workers’ benefits that will be paid out. Economists tend to believe that unemployment periods will generally help slow down the growth of the economy. When there are more unemployed persons around, companies will be reluctant to lift up the production floor. This means that companies will be looser on their production budgets leading to lower levels of output as compared to other times of the year. The slower economy would also mean that the normal retirement age will also rise, thereby reducing the pressure on employees to buy insurance as they get older.

Final Words

The length of time for a person to reach the normal retirement age depends on his/her level of earnings. The faster one can achieve the latter, the better it is for him/her. An individual with good income but who has not yet reached the normal retirement age because he/she is still working can take the advantage of the modified annuities that are provided by the United States government. These special policies are actually based on the earnings of an individual. For example, if you have a thirty-five-year-old body, you can start receiving regular installments even when you are still working but the total payment for these regular payments will be lowered by fifteen percent for women and by ten percent for men. This is basically because older men usually have more problems in earning but at the same time, they tend to retire earlier than women.

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