The table below represents what starting balance is required to fund an adjusted benefit of $12,000 per year based on the stated assumptions (interest, inflation) and the age one lives to in the left hand column. The age of 78 was used to define the life expectancy of current retirees. With the increase in retirement age to 67, what affect does this have on future retirees? In particular, how much of an increase in life expectancy is covered by working two more years?

The calculation uses a $30,000 wage at age 65. Thereafter it is increased at 3.5% to simulate wage growth. The starting balance is calculated using the OASI tax paid and interest credited to both the payment and previous years balance. The worker would pay an additional $3,180 per year to OASI. If we added two years worth of additional OASI payments to the current value ($126,988) of a person retiring at age 65 and living to age 78 and subjected them to a rate of return of 6.9%, the balance at age 67 would be $152,635. At age 67 the adjusted benefit has increased from $12,000 per year to $12,855. The $152635 is enough to fund this initial $12,855 benefit to age 82.

In summary working two more years corresponds to an expectation life expectancy will by four more years. The question is, will the life expectancy at age 65 actually increase four years over the phase in period for full benefits at age 67?

Raising the age of full eligibility to 70 would be equivalent of expecting life expectancy at age 70 to increase to age 89. Is this likely?

What happens if life expectancy were not 78 but 82? It does not change the overall result of working longer versus living longer. For each year one must work longer, one should expect to live at least twice the number of years you add working to recoup ones increased costs.

NOTE: A higher rate of return will increase the number of years funded by two additional years of work. A higher inflation rate will decrease the number of years funded by two additional years of work. Most likely what would happen is as inflation went up, so would the return earned on US Treasury Notes.

CURRENT LIFE EXPECTANCY @ 65	78
WAGE	$30,000
OASI RATE	10.6%
ADDITIONAL TAX/YEAR	$3,180
VALUE OF CURRENT OASI	$126,988
BALANCE AFTER 2 YEARS WORK	$151,915
EQUIVALENT AGE TO LIVE TO	82
WAGE GROWTH	3.5%
RATE OF RETURN	6.90%
INFLATION	3.30%
EFFECTIVE RATE	3.48%
BENEFIT AMOUNT	$12,000

LONGEVITY		78	80	82	84	86	89	92	94	97	101	104
BALANCE		$126,988	$139,315	$152,635	$167,023	$182,558	$199,327	$217,423	$236,944	$257,996	$280,694	$305,160
WORK YEARS		0	1	2	3	4	5	6	7	8	9	10
MUST LIVE THIS MANY MORE YEARS		0	2	4	6	8	11	14	16	19	23	26
BENEFIT		$1,000	$1,035	$1,071	$1,109	$1,148	$1,188	$1,229	$1,272	$1,317	$1,363	$1,411
AGE	AVERAGE WAGE	65	66	67	68	69	70	71	72	73	74	75
65	$30,000	$11,225
66	$31,050	$22,073	$11,618
67	$32,137	$32,555	$22,845	$12,025
68	$33,262	$42,684	$33,694	$23,645	$12,446
69	$34,426	$52,472	$44,178	$34,874	$24,473	$12,881
70	$35,631	$61,930	$54,309	$45,724	$36,094	$25,329	$13,332
71	$36,878	$71,070	$64,098	$56,209	$47,325	$37,358	$26,216	$13,799
72	$38,168	$79,902	$73,558	$66,341	$58,177	$48,981	$38,665	$27,133	$14,282
73	$39,504	$88,437	$82,699	$76,132	$68,663	$60,213	$50,695	$40,018	$28,083	$14,782
74	$40,887	$96,684	$91,532	$85,593	$78,797	$71,067	$62,320	$52,470	$41,419	$29,066	$15,299
75	$42,318	$104,654	$100,068	$94,736	$88,589	$81,555	$73,554	$64,502	$54,306	$42,869	$30,083	$15,835
76	$43,799	$112,355	$108,317	$103,571	$98,052	$91,690	$84,409	$76,128	$66,759	$56,207	$44,369	$31,136
77	$45,332	$119,797	$116,287	$112,108	$107,196	$101,483	$94,899	$87,364	$78,793	$69,096	$58,174	$45,922
78	$46,919	$126,988	$123,989	$120,357	$116,031	$110,947	$105,035	$98,220	$90,421	$81,551	$71,514	$60,210
79	$48,561	$133,937	$131,432	$128,329	$124,570	$120,093	$114,831	$108,712	$101,658	$93,586	$84,405	$74,017
80	$50,260	$140,652	$138,624	$136,032	$132,821	$128,930	$124,296	$118,850	$112,517	$105,216	$96,862	$87,359
81	$52,020	$147,140	$145,574	$143,476	$140,793	$137,469	$133,442	$128,646	$123,009	$116,455	$108,899	$100,252
82	$53,840	$153,411	$152,290	$150,669	$148,498	$145,721	$142,281	$138,113	$133,149	$127,315	$120,531	$112,710
83	$55,725	$159,470	$158,780	$157,620	$155,943	$153,695	$150,822	$147,261	$142,947	$137,809	$131,771	$124,749
84	$57,675	$165,325	$165,051	$164,337	$163,137	$161,401	$159,075	$156,100	$152,415	$147,950	$142,632	$136,383
85	$59,694	$170,983	$171,111	$170,828	$170,089	$168,847	$167,050	$164,642	$161,564	$157,749	$153,128	$147,624
86	$61,783	$176,450	$176,967	$177,100	$176,807	$176,042	$174,757	$172,897	$170,405	$167,218	$163,270	$158,488
87	$63,945	$181,733	$182,626	$183,161	$183,299	$182,995	$182,204	$180,873	$178,948	$176,369	$173,071	$168,985
88	$66,183	$186,839	$188,094	$189,018	$189,572	$189,714	$189,400	$188,581	$187,204	$185,211	$182,542	$179,129
89	$68,500	$191,772	$193,378	$194,677	$195,633	$196,207	$196,354	$196,029	$195,181	$193,756	$191,694	$188,931
90	$70,897	$196,539	$198,484	$200,146	$201,491	$202,481	$203,074	$203,227	$202,890	$202,013	$200,537	$198,403
91	$73,379	$201,146	$203,418	$205,431	$207,151	$208,543	$209,567	$210,182	$210,339	$209,991	$209,083	$207,556
92	$75,947	$205,598	$208,186	$210,538	$212,621	$214,402	$215,842	$216,902	$217,538	$217,701	$217,341	$216,401
93	$78,605	$209,899	$212,794	$215,473	$217,907	$220,063	$221,906	$223,397	$224,494	$225,152	$225,321	$224,948
94	$81,356	$214,056	$217,246	$220,241	$223,014	$225,534	$227,765	$229,673	$231,216	$232,351	$233,032	$233,207
95	$84,204	$218,073	$221,548	$224,849	$227,950	$230,820	$233,427	$235,737	$237,711	$239,308	$240,483	$241,188
96	$87,151	$221,955	$225,706	$229,302	$232,719	$235,928	$238,899	$241,597	$243,988	$246,031	$247,684	$248,900
97	$90,201	$225,705	$229,723	$233,605	$237,328	$240,864	$244,186	$247,260	$250,053	$252,527	$254,642	$256,353
98	$93,358	$229,330	$233,605	$237,763	$241,781	$245,634	$249,295	$252,732	$255,914	$258,805	$261,366	$263,555
99	$96,626	$232,832	$237,356	$241,781	$246,085	$250,244	$254,232	$258,020	$261,578	$264,871	$267,863	$270,514
100	$100,008	$236,217	$240,981	$245,664	$250,244	$254,698	$259,002	$263,130	$267,051	$270,733	$274,142	$277,238
101	$103,508	$239,487	$244,484	$249,416	$254,262	$259,002	$263,612	$268,067	$272,339	$276,397	$280,209	$283,736
102	$107,131	$242,648	$247,869	$253,041	$258,145	$263,161	$268,067	$272,839	$277,450	$281,871	$286,071	$290,016
103	$110,880	$245,702	$251,140	$256,545	$261,898	$267,180	$272,372	$277,450	$282,388	$287,161	$291,737	$296,084
104	$114,761	$248,653	$254,301	$259,930	$265,524	$271,064	$276,532	$281,905	$287,160	$292,272	$297,211	$301,947
105	$118,778	$251,505	$257,356	$263,202	$269,028	$274,817	$280,552	$286,210	$291,772	$297,211	$302,501	$307,614
106	$122,935	$254,260	$260,307	$266,363	$272,414	$278,444	$284,436	$290,371	$296,228	$301,984	$307,613	$313,089

Supplemental table: Defined life expectancy at age 65 is 80.28 for a male and 84.03 for a female (year of table 1994)

LONGEVITY		82	84	86	89	92	95	98	102	106	110	115
BALANCE		$153,411	$167,620	$182,956	$199,503	$217,352	$236,600	$257,350	$279,715	$303,813	$329,775	$357,736
WORK YEARS		0	1	2	3	4	5	6	7	8	9	10
MUST LIVE THIS MANY MORE YEARS		0	2	4	7	10	13	16	20	24	28	33
BENEFIT		$1,000	$1,035	$1,071	$1,109	$1,148	$1,188	$1,229	$1,272	$1,317	$1,363	$1,411
AGE	AVERAGE WAGE	65	66	67	68	69	70	71	72	73	74	75
65	$30,000	$11,225
66	$31,050	$22,073	$11,618
67	$32,137	$32,555	$22,845	$12,025
68	$33,262	$42,684	$33,694	$23,645	$12,446
69	$34,426	$52,472	$44,178	$34,874	$24,473	$12,881
70	$35,631	$61,930	$54,309	$45,724	$36,094	$25,329	$13,332
71	$36,878	$71,070	$64,098	$56,209	$47,325	$37,358	$26,216	$13,799
72	$38,168	$79,902	$73,558	$66,341	$58,177	$48,981	$38,665	$27,133	$14,282
73	$39,504	$88,437	$82,699	$76,132	$68,663	$60,213	$50,695	$40,018	$28,083	$14,782
74	$40,887	$96,684	$91,532	$85,593	$78,797	$71,067	$62,320	$52,470	$41,419	$29,066	$15,299
75	$42,318	$104,654	$100,068	$94,736	$88,589	$81,555	$73,554	$64,502	$54,306	$42,869	$30,083	$15,835
76	$43,799	$112,355	$108,317	$103,571	$98,052	$91,690	$84,409	$76,128	$66,759	$56,207	$44,369	$31,136
77	$45,332	$119,797	$116,287	$112,108	$107,196	$101,483	$94,899	$87,364	$78,793	$69,096	$58,174	$45,922
78	$46,919	$126,988	$123,989	$120,357	$116,031	$110,947	$105,035	$98,220	$90,421	$81,551	$71,514	$60,210
79	$48,561	$133,937	$131,432	$128,329	$124,570	$120,093	$114,831	$108,712	$101,658	$93,586	$84,405	$74,017
80	$50,260	$140,652	$138,624	$136,032	$132,821	$128,930	$124,296	$118,850	$112,517	$105,216	$96,862	$87,359
81	$52,020	$147,140	$145,574	$143,476	$140,793	$137,469	$133,442	$128,646	$123,009	$116,455	$108,899	$100,252
82	$53,840	$153,411	$152,290	$150,669	$148,498	$145,721	$142,281	$138,113	$133,149	$127,315	$120,531	$112,710
83	$55,725	$159,470	$158,780	$157,620	$155,943	$153,695	$150,822	$147,261	$142,947	$137,809	$131,771	$124,749
84	$57,675	$165,325	$165,051	$164,337	$163,137	$161,401	$159,075	$156,100	$152,415	$147,950	$142,632	$136,383
85	$59,694	$170,983	$171,111	$170,828	$170,089	$168,847	$167,050	$164,642	$161,564	$157,749	$153,128	$147,624
86	$61,783	$176,450	$176,967	$177,100	$176,807	$176,042	$174,757	$172,897	$170,405	$167,218	$163,270	$158,488
87	$63,945	$181,733	$182,626	$183,161	$183,299	$182,995	$182,204	$180,873	$178,948	$176,369	$173,071	$168,985
88	$66,183	$186,839	$188,094	$189,018	$189,572	$189,714	$189,400	$188,581	$187,204	$185,211	$182,542	$179,129
89	$68,500	$191,772	$193,378	$194,677	$195,633	$196,207	$196,354	$196,029	$195,181	$193,756	$191,694	$188,931
90	$70,897	$196,539	$198,484	$200,146	$201,491	$202,481	$203,074	$203,227	$202,890	$202,013	$200,537	$198,403
91	$73,379	$201,146	$203,418	$205,431	$207,151	$208,543	$209,567	$210,182	$210,339	$209,991	$209,083	$207,556
92	$75,947	$205,598	$208,186	$210,538	$212,621	$214,402	$215,842	$216,902	$217,538	$217,701	$217,341	$216,401
93	$78,605	$209,899	$212,794	$215,473	$217,907	$220,063	$221,906	$223,397	$224,494	$225,152	$225,321	$224,948
94	$81,356	$214,056	$217,246	$220,241	$223,014	$225,534	$227,765	$229,673	$231,216	$232,351	$233,032	$233,207
95	$84,204	$218,073	$221,548	$224,849	$227,950	$230,820	$233,427	$235,737	$237,711	$239,308	$240,483	$241,188
96	$87,151	$221,955	$225,706	$229,302	$232,719	$235,928	$238,899	$241,597	$243,988	$246,031	$247,684	$248,900
97	$90,201	$225,705	$229,723	$233,605	$237,328	$240,864	$244,186	$247,260	$250,053	$252,527	$254,642	$256,353
98	$93,358	$229,330	$233,605	$237,763	$241,781	$245,634	$249,295	$252,732	$255,914	$258,805	$261,366	$263,555
99	$96,626	$232,832	$237,356	$241,781	$246,085	$250,244	$254,232	$258,020	$261,578	$264,871	$267,863	$270,514
100	$100,008	$236,217	$240,981	$245,664	$250,244	$254,698	$259,002	$263,130	$267,051	$270,733	$274,142	$277,238
101	$103,508	$239,487	$244,484	$249,416	$254,262	$259,002	$263,612	$268,067	$272,339	$276,397	$280,209	$283,736
102	$107,131	$242,648	$247,869	$253,041	$258,145	$263,161	$268,067	$272,839	$277,450	$281,871	$286,071	$290,016
103	$110,880	$245,702	$251,140	$256,545	$261,898	$267,180	$272,372	$277,450	$282,388	$287,161	$291,737	$296,084
104	$114,761	$248,653	$254,301	$259,930	$265,524	$271,064	$276,532	$281,905	$287,160	$292,272	$297,211	$301,947
105	$118,778	$251,505	$257,356	$263,202	$269,028	$274,817	$280,552	$286,210	$291,772	$297,211	$302,501	$307,614
106	$122,935	$254,260	$260,307	$266,363	$272,414	$278,444	$284,436	$290,371	$296,228	$301,984	$307,613	$313,089
107	$127,238	$256,923	$263,159	$269,418	$275,686	$281,948	$288,189	$294,391	$300,534	$306,596	$312,553	$318,380
108	$131,691	$259,496	$265,915	$272,370	$278,848	$285,335	$291,817	$298,276	$304,695	$311,052	$317,327	$323,492
109	$136,300	$261,983	$268,579	$275,223	$281,903	$288,607	$295,322	$302,030	$308,716	$315,359	$321,939	$328,433
110	$141,071	$264,386	$271,152	$277,979	$284,855	$291,769	$298,709	$305,658	$312,601	$319,521	$326,397	$333,207
111	$146,008	$266,708	$273,639	$280,643	$287,708	$294,825	$301,981	$309,163	$316,356	$323,542	$330,704	$337,821
112	$151,119	$268,951	$276,042	$283,217	$290,465	$297,778	$305,144	$312,551	$319,984	$327,428	$334,866	$342,279
113	$156,408	$271,120	$278,365	$285,704	$293,129	$300,631	$308,200	$315,824	$323,490	$331,183	$338,888	$346,587
114	$161,882	$273,215	$280,609	$288,107	$295,704	$303,389	$311,154	$318,987	$326,878	$334,812	$342,775	$350,749
115	$167,548	$275,239	$282,777	$290,430	$298,191	$306,053	$314,007	$322,044	$330,152	$338,319	$346,531	$354,772
116	$173,412	$277,196	$284,873	$292,674	$300,595	$308,628	$316,765	$324,998	$333,315	$341,707	$350,160	$358,659
117	$179,481	$279,086	$286,897	$294,843	$302,918	$311,116	$319,430	$327,852	$336,372	$344,981	$353,667	$362,415
118	$185,763	$280,913	$288,854	$296,939	$305,163	$313,520	$322,005	$330,610	$339,327	$348,146	$357,056	$366,045
119	$192,265	$282,678	$290,745	$298,964	$307,332	$315,843	$324,493	$333,275	$342,181	$351,203	$360,331	$369,553
120	$198,994	$284,384	$292,572	$300,921	$309,428	$318,088	$326,898	$335,851	$344,940	$354,158	$363,495	$372,942
121	$205,959	$286,033	$294,338	$302,812	$311,453	$320,258	$329,221	$338,339	$347,605	$357,013	$366,553	$376,217
122	$213,168	$287,626	$296,044	$304,639	$313,410	$322,354	$331,467	$340,744	$350,181	$359,772	$369,508	$379,382
123	$220,628	$289,165	$297,692	$306,405	$315,302	$324,380	$333,636	$343,068	$352,670	$362,437	$372,364	$382,441
124	$228,350	$290,652	$299,286	$308,112	$317,129	$326,337	$335,733	$345,314	$355,075	$365,014	$375,123	$385,396
125	$236,343	$292,090	$300,825	$309,761	$318,896	$328,229	$337,759	$347,484	$357,400	$367,503	$377,789	$388,252