RETIREMENT 

SECURITY

Shorter Life 

Expectancy Reduces

Projected Lifetime 

Benefits for Lower 

Earners

Report to the Ranking Member, 

Subcommittee on Primary Health and 

Retirement Security, Committee on 

Health, Education, Labor, and Pensions, 

U.S. Senate

March 2016

GAO-16-354

United States Government Accountability Office
Highlights of GAO-16-354, a report to the 

Ranking Member, Subcommittee on Primary 

Health and Retirement Security, Committee on 

Health, Education, Labor, and Pensions, U.S.

Senate

March 2016

RETIREMENT SECURITY

Shorter Life Expectancy Reduces Projected Lifetime 

Benefits for Lower Earners

Why GAO Did This Study

An increase in average life expectancy 

for individuals in the United States is a 

positive development, but also requires 

more planning and saving to support 

longer retirements. At the same time, 

as life expectancy has not increased 

uniformly across all income groups, 

proposed actions to address the 

effects of longevity on programs and 

plan sponsors may impact lowerincome and higher-income individuals 

differently. GAO was asked to examine 

disparities in life expectancy and the 

implications for retirement security.

In this report, GAO examined (1) the 

implications of increasing life 

expectancy for retirement planning,

and (2) the effect of life expectancy on 

the retirement resources for different 

groups, especially those with low 

incomes. GAO reviewed studies on life 

expectancy for individuals approaching 

retirement, relevant agency 

documents, and other publications; 

developed hypothetical scenarios to 

illustrate the effects of differences in

life expectancy on projected lifetime 

Social Security retirement benefits for 

lower-income and higher-income 

groups based on analyses of U.S. 

Census Bureau and Social Security 

Administration (SSA) data; and 

interviewed SSA officials and various 

retirement experts.

GAO is making no recommendations in 

this report. In its comments, SSA 

agreed with our finding that it is 

important to understand how the life 

expectancy in different income groups 

may affect retirement income.

What GAO Found

The increase in average life expectancy for older adults in the United States

contributes to challenges for retirement planning by the government, employers, 

and individuals. Social Security retirement benefits and traditional defined benefit 

(DB) pension plans, both key sources of retirement income that promise lifetime 

benefits, are now required to make payments to retirees for an increasing 

number of years. This development, among others, has prompted a wide range 

of possible actions to help curb the rising future liabilities for the federal 

government and DB sponsors. For example, to address financial challenges for 

the Social Security program, various options have been proposed, such as 

adjusting tax contributions, retirement age, and benefit amounts. Individuals also 

face challenges resulting from increases in life expectancy because they must 

save more to provide for the possibility of a longer retirement.

Life expectancy varies substantially across different groups with significant 

effects on retirement resources, especially for those with low incomes. For 

example, according to studies GAO reviewed, lower-income men approaching 

retirement live, on average, 3.6 to 12.7 fewer years than higher-income men. 

GAO developed hypothetical scenarios to calculate the projected amount of 

lifetime Social Security retirement benefits received, on average, for men with 

different income levels born in the same year. In these scenarios, GAO 

compared projected benefits based on each income groups’ shorter or longer life 

expectancy with projected benefits based on average life expectancy, and found 

that lower-income groups’ shorter-than-average life expectancy reduced their 

projected lifetime benefits by as much as 11 to 14 percent. Effects on Social 

Security retirement benefits are particularly important to lower-income groups 

because Social Security is their primary source of retirement income.

Disparities in Life Expectancy Affect Lifetime Social Security Retirement Benefits

Social Security’s formula for calculating monthly benefits is progressive—that is, 

it provides a proportionally larger monthly earnings replacement for lowerearners than for higher-earners. However, when viewed in terms of benefit 

received over a lifetime, the disparities in life expectancy across income groups 

erode the progressive effect of the program.

View GAO-16-354. For more information, 

contact Charles Jeszeck at (202) 512-7215 or 

jeszeckc@gao.gov.
Page i GAO-16-354 Longevity and Retirement

Letter 1

Background 3

Increasing Life Expectancy Adds to Challenges for Retirement 

Planning 10

Life Expectancy Disparities Negatively Affect Retirement 

Resources for Lower-Income Groups 21

Agency Comments 39

Appendix I List of Selected Studies on Life Expectancy Differences, by Income 41

Appendix II Scenario Calculation Methodology and Additional Examples 43

Appendix III Trend in the Cap on Social Security Taxable Earnings 50

Appendix IV Comments from the Social Security Administration 52

Appendix V GAO Contact and Staff Acknowledgments 53

Related GAO Products 54

Tables

Table 1: Selected Proposals to Adjust the Social Security 

Retirement Program and the Projected Effect on Social 

Security’s Combined Old-Age and Survivors Insurance 

and Disability Insurance Trust Funds 14

Table 2: Retirement Savings Held by Households Headed by 

Individuals near or in Retirement, 2013 18

Table 3: Selected Studies’ Projected Life Expectancy over Time 

for Men Approaching Retirement, by Income Group 23

Table 4: Selected Studies on Life Expectancy Differences, by 

Income 41

Contents
Page ii GAO-16-354 Longevity and Retirement

Figures

Figure 1: Trends in Number of Private Sector Defined Benefit and 

Defined Contribution Plans, 1975-2013 9

Figure 2: Trend in the Annual Net Cash Flow of Social Security’s 

Combined Old-Age and Survivors Insurance and 

Disability Insurance Trust Funds, 1980 through 2025 

(projected) 12

Figure 3: Differences in Projected Years Remaining for Men, by 

Income Group 25

Figure 4: Shorter Life Expectancy Leads to Reduced Projected 

Lifetime Social Security Retirement Benefits for LowerIncome Men 30

Figure 5: Longer Life Expectancy Leads to More Projected 

Lifetime Social Security Retirement Benefits for HigherIncome Men 32

Figure 6: Shorter Life Expectancy Leads to Proportionally Less 

Lifetime Social Security Retirement Benefits for 

Hypothetical Lower-Income Men 34

Figure 7: Present Value Adjusted Lifetime Social Security 

Retirement Benefits 47

for Lower-Income Men 47

Figure 8: Present Value Adjusted Lifetime Social Security 

Retirement Benefits for Higher-Income Men 48

Figure 9: Change in Present Value Adjusted Lifetime Social 

Security Retirement Benefits 49

Figure 10: Percentage of Covered Earnings Subject to the Social 

Security Payroll Tax, 1975-2013 51
Page iii GAO-16-354 Longevity and Retirement

Abbreviations

AIME average indexed monthly earnings

CBO Congressional Budget Office

CDC Centers for Disease Control and Prevention

Census U.S. Census Bureau

DB defined benefit

DC defined contribution

DI Disability Insurance

ERISA Employee Retirement Income Security Act of 1974

IRA individual retirement account

IRS Internal Revenue Service

OCACT Office of the Chief Actuary

OASI Old-Age and Survivors Insurance

PBGC Pension Benefit Guaranty Corporation

SSA Social Security Administration

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-16-354 Longevity and Retirement

441 G St. N.W.

Washington, DC 20548

March 25, 2016

The Honorable Bernard Sanders

Ranking Member

Subcommittee on Primary Health and Retirement Security

Committee on Health, Education, Labor, and Pensions

United States Senate

Dear Senator Sanders:

The increase in average national life expectancy over the past several 

decades is a positive development, but also requires more planning and 

saving to support longer retirements with effects on the government, 

employers, and individuals. However, life expectancy has not increased 

uniformly across all income groups. People who have lower incomes, for 

example, can expect to have shorter lives, on average, compared to 

those with higher incomes. As a result, some proposed actions to address 

the fiscal effects of longevity on retirement programs and plan sponsors 

may impact lower-income and higher-income individuals differently. In 

light of this situation, you asked us to examine disparities in life 

expectancy and the implications for our nation’s policies with respect to 

retirement security. This report provides information on the following:

1. The implications of increasing life expectancy for retirement planning.

2. The effect of life expectancy on the retirement resources for different 

groups, especially those with low incomes.

To explore the implications of increasing life expectancy for retirement 

planning, we reviewed existing publications, including federal agency 

documentation and studies on life expectancy for individuals around 

retirement age conducted by various researchers and federal agencies. 

We also interviewed agency officials and retirement experts, including 

researchers and academics we identified through our review of longevity 

studies and through expert referral. In addition, to examine the effect of 

life expectancy on the retirement resources for different groups, 

especially those with lower incomes, we developed scenarios to illustrate 

how disparities in average life expectancy by income group can affect the 

Letter
Page 2 GAO-16-354 Longevity and Retirement

average amount of lifetime Social Security retirement benefits received by 

different income groups.1 To determine our scenario assumptions, we 

reviewed relevant longevity studies.2 For our life expectancy estimates, 

we relied primarily on a 2007 Social Security Administration (SSA) study 

by Hilary Waldron.3 To inform the income groupings in our scenarios 

(based on the 25th and 75th individual income percentiles), we analyzed 

2015 data from the U.S. Census Bureau’s (Census) Current Population 

Survey. We obtained estimated monthly Social Security benefits using 

SSA’s quick calculator,4 and we estimated average lifetime Social 

Security benefits by applying life expectancy estimates from SSA and 

Waldron. While our report discusses various forms of retirement 

resources, for our scenarios we compare only lifetime Social Security 

retirement benefits against current income. We do not factor in other 

retirement resources, which could include, but are not limited to, future 

payments from employer-sponsored defined benefit plans, retirement 

savings accounts, or housing equity. (For details on the methodology for 

our scenarios, see appendix II.) We assessed the reliability of the data we 

used in our scenarios by reviewing relevant documentation and 

interviewing knowledgeable agency officials. We found the data to be 

reliable for the purposes used in this report.

We conducted this performance audit from December 2014 to March 

2016 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

 1

Social Security retirement benefits are based on covered earnings from work (such as 

wages and salaries). Earnings from work generally make up the bulk of income prior to 

retirement. For our purposes, we grouped our scenarios by individual income rather than 

earnings. 

2

See appendix I for the list of relevant studies we reviewed.

3

Hilary Waldron, “Trends in Mortality Differentials and Life Expectancy for Male Social 

Security-Covered Workers, by Socioeconomic Status,” Social Security Bulletin, vol. 67, 

no. 3 (2007).

4

http://www.ssa.gov/oact/quickcalc/, accessed December 10, 2015. 
Page 3 GAO-16-354 Longevity and Retirement

Because Americans are, on average, living longer and having fewer 

children, the average age of the population is rising and that trend is 

expected to continue. As of 2015, people age 65 and over accounted for 

15 percent of the population, but by 2045 they are expected to comprise 

more than 20 percent of the population.5

Life expectancy is the average estimated number of years of life for a 

particular demographic or group of people at a given age.6 Life 

expectancy can be expressed in two different ways: (1) as the average 

number of years of life remaining for a group, or (2) as the average age at 

death for a group. Life span for a particular individual within a group may 

fall above or below this average. Researchers use a variety of statistical 

methods and assumptions in making their estimates, such as how 

longevity trends are expected to change in the future. Researchers also 

may use different data sources to develop life expectancy estimates. For 

example, some may use death data maintained by SSA, while others may 

use Centers for Disease Control and Prevention (CDC) mortality data or 

Census data.7

 5

Based on the 2015 Social Security Trustees’ Report (intermediate assumptions).

6

Life expectancy is an average for the given group, and it can be actuarially calculated 

from an underlying “mortality table,” which typically consists of a “mortality rate”—the 

estimated probability of death within one year at a given age—for each age. Mortality 

rates can be used to estimate the number of individuals who will live to various ages: in a 

typical group, individuals can be expected to live to different ages, some dying prior to life 

expectancy and some living beyond life expectancy. The exact proportion of individuals 

who fall short of or exceed their life expectancy is generally not 50/50, because life 

expectancy is a mean, not a median. While life expectancy and mortality are related 

concepts, throughout this report we discuss life expectancy because it is more relevant to 

individuals’ retirement planning than the probability that they may die in a particular year. 

7

SSA maintains death data—including names, Social Security numbers, dates of birth, 

and dates of death—for millions of deceased Social Security number-holders. SSA 

receives death reports from a variety of sources, including states, family members, funeral 

directors, post offices, financial institutions, and other federal agencies. SSA shares its full 

set of death data with certain agencies that pay federally-funded benefits, for the purpose 

of ensuring the accuracy of those payments. For other users of SSA’s death data, SSA 

extracts a subset of records, which, to comply with the Social Security Act, excludes statereported death data. See 42 U.S.C. § 405(r). SSA makes this subset available via the 

Department of Commerce’s National Technical Information Service, from which any 

member of the public can purchase the data.

Background

Demographic Shifts and 

Life Expectancy
Page 4 GAO-16-354 Longevity and Retirement

As noted, life expectancy can be estimated from different initial ages, 

such as from birth or from some older age. For a given population, the 

earlier the starting age, the greater the remaining years of life expectancy, 

but the lower the average age at death. This is because, when projected 

from birth, measures of life expectancy reflect the probability of death 

over one’s entire lifetime, including from childhood infectious diseases. In 

contrast, life expectancy calculated at older ages, such as age 65, 

generally predicts that individuals will live to an older age than when life 

expectancy is calculated at birth, since the averages for older persons do 

not include those who have died before that age. As a result, the average 

age that will be reached from birth will be lower than the average age that 

will be reached by those who have already reached age 65.

Studies have found various factors associated with disparities in life 

expectancy. For example, women tend to live longer than men, although 

that gap has been getting smaller, according to SSA data.8 In addition, 

65-year-old men could expect to live until age 79.7 in 1915, on average; 

in 2015, they could expect to live until age 86.1—an increase of about 6.4 

years. Meanwhile, 65-year-old women could expect to live until age 83.7 

in 1915, on average; in 2015, they could expect to live until age 88.7—an 

increase of about 5 years. Other factors that have been shown to be 

associated with differences in life expectancy include income, race, 

education, and geography. A recent study examined trends in life 

expectancy at the county level from 1985 to 2010 and found increasing 

disparities across counties over the 25-year period, especially in certain 

areas of the country.9 The lowest life expectancy for both men and 

women was found in the South, the Mississippi basin, West Virginia, 

Kentucky, and selected counties in the West and Midwest. In contrast, 

substantial improvements in life expectancy were found in multiple 

locations: parts of California, most of Nevada, Colorado, rural Minnesota, 

Iowa, parts of the Dakotas, some Northeastern states, and parts of 

 8

Social Security Administration, Office of the Chief Actuary, “Life Tables for the United 

States Social Security Area 1900 to 2100,” Actuarial Study number 120, SSA pub. No. 11-

11536 (August 2005).

9

Haidong Wang et al., “Left Behind: Widening Disparities for Males and Females in U.S. 

County Life Expectancy, 1985-2010”; Population Health Metrics, vol. 11 no. 8 (2013). For 

example, for men, the highest county life expectancy at birth steadily increased from 75.5 

years in 1985 to 81.7 years in 2010, while the lowest county life expectancy remained 

under 65. For women, the highest county life expectancy at birth increased from 81.1 

years to 85.0 years, and the lowest county life expectancy remained around 73 years.
Page 5 GAO-16-354 Longevity and Retirement

Florida. The study found that while income, education, and economic 

inequality are likely important factors, they are not the only determinants 

of the increasing disparity across counties. Certain environmental factors, 

such as lack of access to health care, and behaviors such as smoking, 

poor diet, and lack of exercise, have also been shown to be associated 

with shorter life expectancy.10

In the United States, income in retirement may come from multiple 

sources, including (1) Social Security retirement benefits, (2) payments 

from employer-sponsored defined benefit (DB) plans, and (3) retirement 

savings accounts, including accounts in employer-sponsored defined 

contribution (DC) plans, such as 401(k) plans; and individual retirement 

accounts (IRA).11

 10Another recent study found that between 1999 and 2013, there was a marked increase 

in the all-cause mortality of middle-aged white non-Hispanic men and women in the United 

States, largely due to increasing death rates from drug and alcohol poisonings, suicide, 

and chronic liver diseases and cirrhosis, especially among those with less education. 

Anne Case and Angus Deaton, Rising morbidity and mortality in midlife among white nonHispanic Americans in the 21st century (Princeton, NJ: Woodrow Wilson School of Public 

and International Affairs and Department of Economics, Princeton University, September 

17, 2015). A subsequent study age-adjusted the mortality rates published in the Case and 

Deaton paper and found that the study’s results held for women but not for men. Andrew 

Gelman and Jonathan Auerbach, “Age-Aggregation Bias in Mortality Trends,” Proceedings 

of the National Academy of Sciences of the United States of America, vol. 113 no. 7 

(National Academy of Sciences, February 16, 2016).

11Income in retirement may also come from other sources, such as non-retirement 

savings, home equity, wages, and federal assistance programs. 

The U.S. Retirement 

System
Page 6 GAO-16-354 Longevity and Retirement

Social Security pays retirement benefits to eligible individuals and family 

members such as their spouses and their survivors, as well as other 

benefits to eligible disabled workers and their families.12 According to 

SSA, in 2014 about 39 million retired workers received Social Security 

retirement benefits. Individuals are generally eligible to receive these 

benefits if they meet requirements for the amount of time they have 

worked in covered employment—i.e., jobs through which they have paid 

Social Security taxes. This includes jobs covering about 94 percent of 

U.S. workers in 2014, according to SSA.13 Social Security retirement 

benefits offer two features that offset some key risks people face in 

retirement: (1) they provide a monthly stream of payments that continue 

until death, so that there is no risk of outliving a person’s benefits; and (2) 

they are generally adjusted annually for cost-of-living increases, so there 

is less risk of inflation eroding the value of a person’s benefits.

Social Security retirement benefits are based on a worker’s earnings 

history in covered employment. The formula for calculating monthly 

benefits is progressive, which means that Social Security replaces a 

higher percentage of monthly earnings for lower-earners than for higherearners. As we reported in 2015, retired workers with relatively lower 

average career earnings receive monthly benefits that, on average, equal 

about half of what they made while working, whereas workers with 

relatively high career earnings receive benefits that equal about 30 

percent of earnings.14 In 2013, SSA reported that the program provided at 

 12We use the term “Social Security retirement benefits” to refer to benefits provided under 

the Old-Age and Survivors Insurance (OASI) program. While SSA administers other 

programs, including Disability Insurance and Supplemental Security Income, our focus is 

on retirement benefits. For more about Social Security programs, see GAO, Social 

Security’s Future: Answers to Key Questions, GAO-16-75SP (Washington D.C.: October 

2015). In this report, for ease of reference, we use the term “worker;” however, many 

individuals may no longer be working at the time they receive benefits and others, such as 

dependents and survivors of workers who contributed to Social Security, may never have 

worked in covered employment.

13According to SSA, workers excluded from coverage include certain employees of 

federal, state, and local governments, certain workers with very low net earnings from selfemployment, and railroad workers. About one-fourth of public-sector employees do not 

pay Social Security taxes on the earnings from their government jobs and are not entitled 

to any Social Security benefits based on this work.

14This example is based on hypothetical workers born in 1985 and retiring at age 65 in 

2050. The career-average level of earnings for each hypothetical worker was based on a 

percentage of Social Security’s national average wage index. The low and high earners 

had earnings about 45 percent and 160 percent of the national average wage index 

($21,054 and $74,859, respectively, for 2014). See GAO-16-75SP.

Social Security

Social Security Benefit Formula

Social Security retirement benefits are 

generally derived from an individual’s average 

indexed monthly earnings (AIME). For 

retirement benefits, the AIME is based on the 

worker’s highest 35 years’ earnings for which 

they paid Social Security taxes, and those 

earnings are indexed to changes in average 

wages over the worker’s career. 

For 2016, the benefit formula replaces:

• 90% of the first $856 of AIME, 

• 32% of AIME over $856 and up to 

$5,157, and 

• 15% of AIME over $5,157. 

These “bend points” are also indexed for 

changes in average wages.

Source: GAO analysis of Social Security Administration 

documents. | GAO-16-354
Page 7 GAO-16-354 Longevity and Retirement

least half of retirement income for 64 percent of beneficiaries age 65 or 

older in 2011 and that 35 percent of beneficiaries in this age range 

received 90 percent or more of their income from Social Security.

For retired workers, Social Security pays full (unreduced) benefits at the 

full retirement age, which ranges from 65 to 67 depending on an 

individual’s birth year. Workers can claim Social Security retirement 

benefits as early as age 62, resulting in a reduced monthly benefit, or can 

delay claiming after they reach full retirement age, resulting in an 

increased monthly benefit until age 70 (i.e., no further increases are 

provided for delayed claiming after age 70). According to SSA 

documentation, the Social Security benefit formula adjusts the amount of

monthly benefits to reflect the average remaining life expectancy at each 

claiming age. More specifically, benefits are adjusted up or down based 

on claiming age so that, on average, the actuarial present value of a 

beneficiary’s total lifetime benefits is about the same regardless of 

claiming age.15 For example, workers currently age 62 who would reach 

full retirement age at 66 would receive a monthly benefit about 25 percent 

lower if claiming early, at age 62, compared with the benefit that would be 

paid at their full retirement age. Those delaying claiming until age 70 

would receive about 32 percent more per month than their full retirement 

age benefit, according to SSA. 

Despite higher monthly benefits for those who delay claiming, in 2014, 

age 62 was the most prevalent age to claim Social Security retirement 

benefits: About 37 percent of total retired worker benefits awarded were 

awarded at age 62.16 When workers die before reaching age 62, they 

may not receive any of the Social Security retirement benefits that they 

would have been entitled to receive had they lived longer.17 In cases 

 15An actuarial present value takes into account both life expectancy and the time value of 

money (payments sooner are worth more than payments later). For more on these 

adjustment factors, see GAO-16-75SP.

16Total benefits awarded include disability benefits that convert to retirement benefits at 

the worker’s full retirement age. Calculated from the Annual Statistical Supplement to the 

Social Security Bulletin, 2015, table 6.A4. The share of people claiming at age 62 varies 

by birth cohort, and while age 62 remains the most prevalent claiming age, the share of 

people claiming at age 62 has decreased with successive birth cohorts. See GAO, 

Retirement Security: Challenges for Those Claiming Social Security Benefits Early and 

New Health Coverage Options, GAO-14-311 (Washington, D.C.: Apr. 23, 2014).

17The CDC reported that nearly 25 percent of the U.S. deaths in 2011 were among people 

age 25 to 65.
Page 8 GAO-16-354 Longevity and Retirement

where a worker dies before or during retirement, there are survivors 

benefits that provide widows and widowers up to 100 percent of the 

deceased spouse’s benefit.18

Defined benefit (DB) plans are generally tax-advantaged retirement plans 

that typically provide a specified monthly benefit at retirement, known as 

an annuity, for the lifetime of the retiree.19 Qualified private sector DB 

plans may be single-employer or multiemployer plans.20 Single-employer 

plans make up the majority of private sector DB plans (about 94 percent) 

and cover the majority of private sector DB participants (75 percent of 

about 41.2 million workers and retirees in 2014).21 The amount of the 

annuity provided by a DB plan is determined according to a formula 

specified by the plan, and is typically based on factors such as salary, 

years of service, and age at retirement. Plan sponsors generally bear the 

risks associated with investing the plan’s assets and ensuring that 

sufficient funds are available to pay the benefits to plan participants as 

they come due.22 As indicated in figure 1, over the past several decades 

employment-based retirement plan coverage, especially in the private 

sector, has shifted away from DB plans to defined contribution (DC) 

 18Children meeting certain eligibility criteria, including those who are under 18 or disabled, 

may also receive survivors benefits.

19To receive tax-advantaged treatment, DB and DC plans must meet certain requirements 

specified in the Internal Revenue Code and the Employee Retirement Income Security Act 

of 1974, as amended (ERISA). Such plans are called qualified plans. Qualified DB plans 

also generally must provide for an annuity for an eligible surviving spouse. In general, 

ERISA applies only to plans sponsored by private sector employers.

20Multiemployer plans are established through collective bargaining agreements between 

labor unions and two or more employers, and plan assets are maintained in a single 

account. Multiemployer plans should not be confused with multiple-employer plans, which 

are a category of single-employer plans. Multiple-employer plans are typically established 

without collective bargaining agreements. Multiple-employer DB plans must be funded as 

if each participating employer were maintaining a separate plan.

21PBGC, 2013 Pension Insurance Data Tables, see http://www.pbgc.gov/prac/databooks.html

22To reduce plan liabilities, some DB plan sponsors have offered participants the option of 

replacing their annuity with a lump sum payment, so that the participants assume the risks 

of managing the funds, and outliving the funds, themselves. See GAO, Private Pensions: 

Participants Need Better Information When Offered Lump Sums That Replace Their 

Lifetime Benefits, GAO-15-74 (Washington, D.C.: Jan. 27, 2015).

Defined Benefit Plans
Page 9 GAO-16-354 Longevity and Retirement

plans, which generally require participants to bear the risks of managing 

their assets.

23

Figure 1: Trends in Number of Private Sector Defined Benefit and Defined 

Contribution Plans, 1975-2013

Retirement savings accounts can provide individuals with a taxadvantaged way to save for retirement, but, unlike DB plans, they 

generally require individuals to manage their own assets. There are two 

primary types of retirement savings vehicles: employer-sponsored DC 

plans, such as 401(k)s, and individual retirement accounts (IRA).24 DC 

plans’ benefits are based on contributions made by workers (and 

 23While figure 1 describes pension plans with 100 or more participants, the trend is similar 

when comparing all pension plans. 

24As previously mentioned, qualified DC plans must meet certain requirements in ERISA 

and the Internal Revenue Code. In addition, to receive tax-advantaged treatment, IRAs 

must meet certain requirements in the Internal Revenue Code.

Retirement Savings Accounts
Page 10 GAO-16-354 Longevity and Retirement

sometimes by their employers) and the performance of the investments in 

participants’ individual accounts. Workers are generally responsible for 

determining their contribution rate, managing their savings and 

investments, and deciding how to draw down their assets after 

retirement.25

There are also tax-advantaged retirement savings accounts that are not 

employer-sponsored, such as traditional IRAs and Roth IRAs. Eligible 

individuals may make contributions to traditional IRAs with pre-tax 

earnings and any savings in traditional IRAs are tax-deferred—that is, 

taxed at the time of distribution. Eligible individuals’ contributions to Roth 

IRAs are made with after-tax earnings and are generally not taxed at the 

time of distribution.26 Individuals may choose to roll over their employersponsored DC plans into an IRA when they leave employment.27

The projected continuing increase in life expectancy for both men and 

women in the United States contributes to longevity risk in retirement 

planning. For the Social Security program and employer-sponsored 

defined benefit plans, longevity risk is the risk that the program or plan 

assets may not be sufficient to meet obligations over their beneficiaries’ 

lifetimes. For individuals, longevity risk is the risk that they may outlive 

any retirement savings they are responsible for managing, such as in a 

DC plan.

 25However, employers that sponsor tax-qualified plans are subject to requirements in 

administering the plan, including certain fiduciary responsibilities.

26Both traditional and Roth IRAs are subject to various requirements such as annual 

contribution limits, and Roth IRAs are subject to annual income limits.

27For more information about 401(k) rollovers, see GAO, 401(K) Plans: Labor and IRS 

Could Improve the Rollover Process for Participants, GAO-13-30 (Washington, D.C.: Mar.

7, 2013).

Increasing Life 

Expectancy Adds to 

Challenges for 

Retirement Planning
Page 11 GAO-16-354 Longevity and Retirement

Increasing life expectancy adds to the long-term financial challenges 

facing Social Security by contributing to the growing gap between annual 

program costs and revenues.28 Although life expectancy is only one factor 

contributing to this gap, as individuals live longer, on average, each year 

there are more individuals receiving benefits, adding to the upward 

pressure on program costs.

According to the 2015 report from the Board of Trustees of the Federal 

Old-Age and Survivors Insurance (OASI) and Federal Disability Insurance 

(DI) Trust Funds, the Social Security OASI trust fund is projected to have 

sufficient funds to pay all promised benefits for nearly two decades, but 

continues to face long-term financial challenges. In 2010, program costs 

for the combined OASI and DI trust funds began exceeding non-interest 

revenues and are projected to continue to do so into the future (see fig.

2). The 2015 Trustees Report projected that the OASI trust fund would be 

depleted in 2035, at which point continuing revenue would be sufficient to 

cover 77 percent of scheduled benefits.29

 28We recently examined the challenges facing the Social Security retirement and disability 

programs. GAO-16-75SP.

29The 2015 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors 

Insurance and Federal Disability Insurance Trust Funds (Washington D.C.: July 22, 2015).

Increasing Life 

Expectancy Adds to 

Challenges for Social 

Security
Page 12 GAO-16-354 Longevity and Retirement

Figure 2: Trend in the Annual Net Cash Flow of Social Security’s Combined Old-Age and Survivors Insurance and Disability 

Insurance Trust Funds, 1980 through 2025 (projected)

Notes: Non-interest revenues are revenues from payroll taxes, taxation of benefits, and 

reimbursements from the general fund of the U.S. Department of the Treasury. Total costs include 

benefit payments, administrative costs, and Railroad Retirement Board interchange costs. (Interest 

revenue is excluded.) Changes made by the Social Security Benefit Protection and Opportunity 

Enhancement Act of 2015 may affect these figures. For further information about operations of the 

combined trust fund, see The 2015 Annual Report of the Board of Trustees of the Federal Old-Age 

and Survivors Insurance and Federal Disability Insurance Trust Funds, 158-159, 

https://www.socialsecurity.gov/OACT/TR/2015/.

To help address the long-term financial challenges facing the Social 

Security retirement program, various changes have been made over the 

years. For example, the Social Security Amendments of 1983 established 

a phased-in increase in the full retirement age, gradually raising it from 

age 65 (for workers born in 1937 or earlier) to age 67 (for workers born in 
Page 13 GAO-16-354 Longevity and Retirement

1960 and later).30 Also, challenges facing the DI trust fund have affected 

OASI. For example, in late 2015, Congress passed a law that reallocates 

some tax revenue from the OASI trust fund to the DI trust fund, thus 

delaying benefit reductions to DI beneficiaries that were projected to 

occur in 2016 until 2022.31

In addition, a wide range of options to adjust Social Security further have 

been proposed. To illustrate this range of options, table 1 provides 

examples from among the options and summarizes their effect according 

to SSA’s Office of the Chief Actuary (OCACT).32 Some options would 

reduce benefit costs, such as by making adjustments to the retirement 

age. Other options would increase revenues, such as by making 

adjustments to payroll tax contributions.33 The table shows the most 

recent OCACT analysis, which is based on the intermediate assumptions 

of the 2015 Trustees Report and reflects the impact on both the OASI and 

DI trust funds combined over the next 75 years. The trustees estimate 

that, using intermediate projections, the shortfall toward the end of their 

75-year projections would reach 4.65 percent of taxable payroll for 2089. 

The options are based on proposals introduced in Congress or suggested 

by experts, but are not exhaustive.34 Each has advantages and 

 30According to SSA, throughout the program’s history there have been many changes 

intended to increase revenues or reduce expenditures and thereby secure the program. 

For example, according to SSA, the tax contribution rate for employees, employers, or 

self-employed workers has increased more than 20 times. In addition, changes have been 

made to benefits and to cost-of-living adjustments, such as those made by the Social 

Security Amendments of 1977 and 1983. 

31The Social Security Benefit Protection and Opportunity Enhancement Act of 2015, 

among other things, increased the proportion of the employer and employee tax 

contributions to the trust funds that specifically go to the DI trust fund from 1.8 percent to 

2.37 percent starting in 2016 through the end of 2018. Pub. L. No. 114-74, tit. VIII, 129 

Stat. 584, 601-20. The combined payroll tax remains at 12.4 percent of covered earnings.

32Social Security Administration Office of Chief Actuary, Summary of Provisions That 

Would Change the Social Security Program (Sept. 16, 2015). 

33For more information on payroll tax contributions, see appendix III.

34Readers interested in a more detailed compendium of proposed changes to the Social 

Security programs may refer to the website of the Social Security Administration Office of 

the Chief Actuary. The Office of the Chief Actuary has prepared memoranda for many of 

the policy options, which include analyses showing the estimated effect of the changes on 

the financial status of the Social Security programs. See 

http://www.ssa.gov/OACT/solvency/provisions/index.html.
Page 14 GAO-16-354 Longevity and Retirement

disadvantages, and GAO is not recommending or endorsing the adoption 

of any of the specific options presented.35

Table 1: Selected Proposals to Adjust the Social Security Retirement Program and the Projected Effect on Social Security’s 

Combined Old-Age and Survivors Insurance and Disability Insurance Trust Funds

Adjustments to the retirement age • Continue to increase the full retirement age. According to the Office of the Chief 

Actuary’s (OCACT) most recent estimates, raising the full retirement age, beginning 

in 2022, by one additional month every 2 years until the retirement age reaches 68 

would eliminate 13 percent of the shortfall over the next 75 years.

• Increase the age at which early claiming can take place. OCACT estimates that 

raising the early retirement age, starting in 2017, by 2 months each year and ending 

in 2034 (ending with the early retirement age at 65) would increase the shortfall by 2 

percent over 75 years, due to a corresponding rise in costs for the disability program.

Adjustments to the structure of 

retirement benefits

• Reduce monthly retirement benefits for all retirees. OCACT estimates that reducing 

benefits by 3 percent for newly eligible beneficiaries, beginning in 2016, would 

eliminate 14 percent of the shortfall over 75 years.

• Reduce initial monthly retirement benefits for those with higher lifetime earnings. 

OCACT provides estimates for several progressive price indexing proposals that 

reduce benefits for the top category of earnings, for example, reducing the rate at 

which benefits are awarded for earnings over the 30th, 40th, 50th or 60th percentile. 

The effect of such proposals depends upon the reduction in rate and the point at 

which that reduction is applied. OCACT estimates that the proposals they examined 

would eliminate 26 to 55 percent of the shortfall over the next 75 years.

Adjustments to payroll tax 

contributions

• Increase the combined payroll taxes for employers and employees (currently 12.4 

percent of covered earnings). OCACT examines several options for increasing the 

payroll tax rate, with the most significant effect coming from raising the tax rate to 

15.2 percent in 2028-2057 and to 18 percent in 2058 and later. That proposal is 

estimated to eliminate 110 percent of the shortfall over the next 75 years.

• Eliminate the maximum taxable earnings (currently set at $118,500). OCACT also 

examines a number of options for eliminating the taxable maximum. For example, 

eliminating the taxable maximum, beginning in 2016, and providing benefit credit for 

earnings above the current maximum would eliminate 71 percent of the shortfall over 

the next 75 years. 

Source: GAO analysis of Social Security Office of Chief Actuary report, 2015. | GAO-16-354

Notes: Estimates of effects are based on the intermediate assumptions of the 2015 Trustees Report 

and reflect the impact on the combined trust funds over the next 75 years. We are not recommending 

or endorsing the adoption of any particular policy option or package of options.

 35For example, in 2010, we reported that raising the age for early claiming of the Social 

Security retirement benefit may put additional stress on the DI trust fund. See GAO, Social 

Security Reform: Raising the Retirement Ages Would Have Implications for Older Workers 

and SSA Disability Rolls, GAO-11-125 (Washington, D.C.: Nov. 18, 2010).
Page 15 GAO-16-354 Longevity and Retirement

Although there are many factors at play in the decline of defined benefit 

(DB) plans, increasing life expectancy adds to the challenges these plans 

face by increasing the financial obligations needed to make promised 

payments for their beneficiaries’ lifetimes.36 For example, plan sponsors 

and industry experts estimate that the Society of Actuaries’ 2014 revised 

mortality tables, if adopted for DB plans, would increase plan obligations 

by 3.4 to 10 percent, depending on the characteristics of a plan’s 

participants.37 As of 2012, more than 85 percent of single-employer DB 

plans were underfunded by a total of more than $800 billion, according to 

the most recent data available from the Pension Benefit Guaranty 

Corporation (PBGC).38 DB plan sponsors have increasingly been taking 

steps, known as “de-risking,” to either reduce risk or shift risk away from 

sponsors, often to participants. De-risking can be classified as internal or 

external.39

Internal de-risking approaches include reducing risk by (1) shifting plan 

assets into safer investments that better match certain characteristics of a 

plan’s benefit liabilities, and (2) restricting growth in the size of the plan by 

restricting future plan participation or benefit accruals, such as by 

“freezing” the plan (variations of which include closing the plan to newlyhired workers or eliminating the additional accrual of benefits by those 

already participating in the plan). In 2012, more than 40 percent of singleemployer DB plans were frozen in some form, according to the most 

recent data available from PBGC, and many frozen plans are ultimately 

terminated, which can shift the risk of ensuring an adequate lifetime 

retirement income to individuals, as discussed below.

 36Sponsors of DB plans are also responsible for managing financial risks, such as 

fluctuations in the value of plan assets and in interest rates, either of which can cause 

volatility in the plan’s funded status and plan contributions.

37The Internal Revenue Service (IRS) prescribes and periodically revises mortality tables 

to be used by qualified DB plans to calculate the plans’ funding target and other funding 

calculations. The current mortality tables are based, in part, on mortality tables developed 

by the Society of Actuaries in 2000. IRS expects to issue proposed regulations revising 

the mortality tables for future years and has solicited comments on this issue, including on 

the 2014 revised Society of Actuaries tables. IRS Notices 2013-49 and 2015-53.

38Single-employer plans covered 75 percent of DB participants in 2014. PBGC, 2013 

Pension Insurance Data Tables, http://www.pbgc.gov/prac/data-books.html.

39For qualified DB plans, any de-risking actions must comply with requirements in ERISA 

and the Internal Revenue Code in order to maintain their tax-advantaged status.

Increasing Life 

Expectancy Adds to 

Challenges for Defined 

Benefit Plans
Page 16 GAO-16-354 Longevity and Retirement

External de-risking involves closing the plan completely (referred to as 

terminating the plan) or reducing the size of the plan by transferring a 

portion of plan liabilities, plan assets, and their associated risk to external 

parties—typically either to participants or to an insurance company. For 

example, an employer may terminate its DB plan, if it can fund all of the 

benefits owed through the purchase of a group annuity contract from an 

insurance company (sometimes called a “group annuity buy-out”).40 Short 

of termination, an employer can also transfer a portion of plan assets and 

liabilities to an insurance company for a certain group of plan participants, 

such as former employees with vested benefits.41 Alternatively, an 

employer may, under certain circumstances, terminate its DB plan by 

paying all the benefits owed in another form, such as by providing a lump 

sum to each participant or beneficiary of the plan, if the plan permits. The 

employer could also opt to make a lump sum buy-out offer only to certain 

plan participants.42 When such an offer is made, plan participants have a 

specified amount of time, known as the lump sum “window,” to choose 

between keeping their lifetime annuity or taking a lump sum. Participants 

 40Such actions are referred to as “standard terminations.” 

41Once responsibility is transferred to an insurance company, the participant’s rights and 

protections are circumscribed by the annuity contract, the financial status of the issuer, 

and state guarantees, rather than the protections under ERISA, although in some cases, 

ERISA provisions may be incorporated into the annuity contract. In general, once the 

transaction is complete, the participant will receive an annuity certificate from the 

insurance company, and then will receive payments from that insurer, with protections 

from the state insurance system and state guaranty associations. See 2013 ERISA 

Advisory Council Report, Private Sector Pension De-risking and Patient Protections.

42Until recently, DB plan sponsors were offering lump sum payments to participants who 

were receiving annuity payments (known as “lump sum window offers”). On July 9, 2015, 

IRS issued a notice stating its intent to prohibit these lump sum window offers, effective as 

of the date of the notice, and stating that the regulations would be amended accordingly. 

According to agency officials, other instances of accelerated benefit payments, including 

lump sum buyouts to participants who were separating from employment but had not yet 

begun collecting their benefits, and those allowed pursuant to the regulations under 

Internal Revenue Code section 401(a)(9), were unaffected by the notice. The notice also 

allowed for the continuation of certain lump sum window offers already in process. IRS 

Notice 2015-49.
Page 17 GAO-16-354 Longevity and Retirement

who accept the lump sum assume all of the risk of managing the funds for 

the remainder of their lives.43

A key reason that individuals face challenges in planning for retirement is 

that many people do not understand their life expectancy, the number of 

years they will likely spend in retirement, or the amount they should save 

to support their retirement. For example, a survey conducted by the 

Society of Actuaries showed that there is a greater tendency for retired 

respondents to underestimate rather than overestimate their life 

expectancy.44 In addition, many individuals will live beyond their life 

expectancy in any case, since it is an average. Further, as we reported in 

2015, older workers tend to retire sooner than they expected. Coupled 

with increasing life expectancy, this means they will likely spend more 

years in retirement than anticipated.45 In 2015, more than a third of 

workers surveyed by the Employee Benefit Research Institute reported 

that they expected to retire at age 66 or later and an additional 10 percent 

expected to never retire; however, only 14 percent of current retirees 

reported that they retired after age 65. Similarly, 9 percent of workers said 

they expected to retire before age 60, while 36 percent of current retirees 

reported they retired earlier. The median age of retirement reported was 

age 62.46 Additionally, only 48 percent of those surveyed had calculated 

how much in savings they would need for retirement.47

 43In a previous report, we found that while comprehensive data on lump sum window 

offers were not available, experts generally agreed that use of such offers was becoming 

more frequent. GAO-15-74. Since this report was published, IRS issued a notice, 

described previously, that generally prohibits lump sum window offers for those 

participants already receiving benefits from a DB plan, without affecting other allowed 

lump sum payments from a DB plan. Thus, any current expectation of future lump sum 

window offers would likely be limited to separated vested employees (i.e., former 

employees) who are not currently receiving benefits under a DB plan. IRS Notice 2015-49.

44Society of Actuaries, Key Findings and Issues: Longevity, 2011 Risks and Process of 

Retirement Survey Report (June 2012).

45GAO, Retirement Security: Most Households Approaching Retirement Have Low 

Savings, GAO-15-419 (Washington, D.C.: May 12, 2015).

46This broadly aligns with SSA data on when individuals claim Social Security retirement 

benefits. See GAO-14-311.

47Employee Benefit Research Institute, The 2015 Retirement Confidence Survey: Having 

a Retirement Savings Plan a Key Factor in Americans’ Retirement Confidence (April 

2015).

Increasing Life 

Expectancy Adds to 

Challenges for Individuals’ 

Retirement Planning
Page 18 GAO-16-354 Longevity and Retirement

Beyond underestimating life expectancy, individuals preparing for 

retirement face a number of additional challenges in accumulating 

retirement savings sufficient to sustain them for their lifetime. In previous 

work we found that many households near or in retirement have little or 

no retirement savings (see table 2).48 Nearly 30 percent of households 

headed by individuals age 55 and older have neither retirement savings 

nor a DB plan.

Table 2: Retirement Savings Held by Households Headed by Individuals near or in Retirement, 2013

Households headed by 

individuals age 55-64

Households headed by 

individuals age 65-74

Households headed by 

individuals age 75 and older

Percent with no retirement savings 41 52 71

Percent with retirement savings 59 48 29

median amount saved $104,000 $148,000 $69,000

equivalent inflation-adjusted annuity $310 per month

(for a 60-year-old)

$649 per month

(for a 70-year-old)

$467 per month

(for an 80-year-old)

Source: GAO analysis of 2013 Survey of Consumer Finances data. | GAO-16-354

About half of private sector employees do not participate in any employersponsored retirement plan.49 In previous work, we found that among 

those not participating, 84 percent reported that their employer did not 

offer a plan or they were not eligible for the program their employer 

offered.50 Those that do participate in employer-sponsored retirement 

plans are increasingly offered access only to DC plans, which—unlike DB 

plans—do not typically provide a guaranteed monthly benefit for life. For 

many of these participants, the level of savings accumulated in their DC 

retirement accounts at the time they leave the workforce will not be 

 48We also found that more than 70 percent of households headed by individuals age 55-

64 also carry debt. GAO-15-419. 

49U.S. Bureau of Labor Statistics, National Compensation Survey: Employee Benefits in 

the United States (March 2015).

50See GAO, Retirement Security: Federal Action Could Help State Efforts to Expand 

Private Sector Coverage, GAO-15-556 (Washington, D.C.: Sept. 10, 2015).
Page 19 GAO-16-354 Longevity and Retirement

sufficient to sustain their retirement.51 Moreover, employer-sponsored DC 

plans typically offer only an account balance at retirement, leaving 

participants to identify longevity risks and manage how they will draw 

down their funds over the course of their retirement.52

To help address individuals’ difficultly in estimating their life expectancy 

and the resources needed to avoid outliving their savings, the federal 

government, plan sponsors, and others have developed certain tools to 

aid with retirement planning. For example, benefits calculators assist 

participants in translating their savings into potential annual retirement 

income. One such calculator, available on the U.S. Department of Labor’s 

website, assumes survival to age 95, which is beyond the average life 

expectancy for individuals currently age 65.53 To encourage saving 

among those who lack access to employer-sponsored plans, in 

November 2015, myRA, a federal government-managed retirement 

savings program, was opened to individuals below a certain income 

threshold.54 Also, as we reported in 2015, a number of states are 

exploring strategies to expand private sector coverage for people who 

 51Women are particularly at risk of outliving their savings because they live longer, on 

average, than men, although the gap between the sexes is diminishing. Additionally, as 

discussed in previous reports, women who participate in DC plans contribute less to their 

plans. Women age 65 and over have less retirement income, on average, and live in 

higher rates of poverty than men in that age group. See GAO, Retirement Security: 

Women Still Face Challenges, GAO-12-699 (Washington, D.C.: July 19, 2012) and GAO 

Retirement Security: Older Women Remain at Risk, GAO-12-825T (Washington, D.C.: 

July 25, 2012).

52In 2012, we reported that annuities are complex, represent some risks to consumers, 

and require them to make multiple complex decisions. See GAO, Retirement Security: 

Annuities with Guaranteed Lifetime Withdrawals Have Both Benefits and Risks, but 

Regulation Varies across States, GAO-13-75 (Washington, D.C.: Dec. 10, 2012).

53The U.S. Department of Labor offers two calculators: 

http://askebsa.dol.gov/retirementcalculator/ui/general.aspx and 

http://www.dol.gov/ebsa/regs/lifetimeincomecalculator.html. More calculators are available 

from financial services companies and others. We recently recommended that the 

Secretary of Labor take action to help workers make appropriate adjustments to the 

replacement rates used in calculating their specific retirement income needs. This 

included modifying the U.S. Department of Labor’s retirement planning tools. See GAO, 

Retirement Security: Better Information on Income Replacement Rates Needed to Help 

Workers Plan for Retirement, GAO-16-242 (Washington, D.C.: Mar. 1, 2016).

54The U.S. Department of the Treasury created a new nonmarketable, electronic savings 

bond for the myRA program, which allows eligible individuals to establish Roth IRAs. 

MyRA allows individuals to make one-time contributions or set up recurring contributions 

(which can be deducted from their wages) that will be invested in these savings bonds.
Page 20 GAO-16-354 Longevity and Retirement

otherwise do not have access to a plan.55 In addition, for those with 

employer-sponsored plans, the Pension Protection Act of 2006 included 

provisions that made it easier for certain DC plan sponsors to implement 

automatic enrollment and automatic escalation so that workers can be 

defaulted into plan participation with rising contributions over time.56

Default investment arrangements, including target date funds which 

invest according to length of time until retirement, can also help 

participants to maintain a balanced investment portfolio with a level of risk 

that is appropriate to their retirement dates. Moreover, to provide greater 

assurance that individuals with DC plans will not outlive their savings, 

some plan sponsors are adding an annuity option at retirement.57 In 

addition, Internal Revenue Service (IRS) regulations that went into effect 

in July 2014 allow for a Qualified Longevity Annuity Contract whereby 

participants in 401(k) and other qualified DC plans and traditional IRAs 

may use a portion of their accounts to purchase annuities that begin 

payout no later than age 85.58

In sum, despite the efforts by the federal government, plan sponsors, and 

others to encourage greater retirement savings, many individuals may not 

be adequately prepared for retirement. The trend toward increasing life 

 55GAO-15-556. 

56Pub. L. No. 109-280, 120 Stat. 780. Among other things, the Act exempted “automatic 

contribution arrangements” that meet certain criteria from ERISA nondiscrimination testing 

requirements. The Act also provided for qualifying automatic contribution arrangements to 

receive protection from fiduciary liability for their default investments, if they meet certain 

notice requirements and other conditions established by the U.S. Department of Labor. 

See 29 C.F.R. § 2550.404c-5. In addition, in September 2009, the U.S. Department of the 

Treasury announced IRS actions designed to further promote automatic enrollment and 

the use of automatic escalation policies. These IRS actions included Revenue Ruling 

2009-30, which demonstrates ways a 401(k) plan sponsor can include automatic 

contribution increases in its plan, and Notice 2009-65, which includes sample automatic 

enrollment plan language that a 401(k) plan sponsor can adopt with automatic IRS 

approval.

57Although the market remains relatively small, certain annuity contracts for retirees have 

been increasing in recent years, growing by 16 percent in 2012 alone. See Variable 

Annuity Guaranteed Living Benefits Utilization, 2012 Experience, A Joint Study by the 

Society of Actuaries and LIMRA. 

58The regulations require that the qualified longevity annuity contract meet various 

requirements, such as limitations on premiums and certain disclosure and annual 

reporting requirements. The regulations also provide that the maximum age to begin 

payout may be adjusted to reflect changes in mortality. 26 C.F.R. § 1.401(a)(9)-6.
Page 21 GAO-16-354 Longevity and Retirement

expectancy may mean that more individuals outlive their savings, with 

only their Social Security benefits to rely on.

Lower-income individuals have shorter-than-average life expectancy, 

which means that they can expect to receive Social Security retirement 

benefits for substantially fewer years than higher-income individuals who 

have longer-than-average life expectancy. As a result, when disparities in 

life expectancy are taken into account, our analysis indicates that, on 

average, projected lifetime Social Security retirement benefits are 

reduced for lower-income individuals but are increased for higher-income 

individuals, relative to what they would have received if they lived the 

average life expectancy for their cohort.59 Also, our analysis indicates that 

one frequently suggested change to address Social Security’s financial 

challenges, raising the retirement age, would further reduce projected 

lifetime benefits for lower-income groups proportionally more than for 

higher-income groups.

People with lower incomes can expect to live substantially fewer years as 

they approach retirement than those with higher incomes, on average, 

according to studies we identified and reviewed. For example, these 

studies estimate that lower-income men approaching retirement live 

between 3.6 and 12.7 fewer years than those in higher-income groups, on 

average, depending on birth year and other factors such as whether 

income groups were calculated by top or bottom half, quartile, quintile, or 

decile (see table 3).60 Similarly, studies we reviewed found that lowerincome women also live fewer years than higher-income women, on 

average, with the differences ranging more widely, from 1.5 years to 13.6 

 59As noted earlier, life expectancy can be expressed in two different ways: (1) as the 

average number of years of life remaining for a group, or (2) as the average age at death 

for a group. For simplicity, in this report, we generally use the term to mean the latter 

expression (average age at death), and use the phrase “years of life remaining” when 

referring to the former expression. 

60We reviewed selected longevity studies published in the past 10 years (see appendix I). 

Life Expectancy 

Disparities Negatively 

Affect Retirement 

Resources for LowerIncome Groups

Lower-Income Groups’ 

Life Expectancy Has Not 

Increased as Much as 

Higher-Income Groups’ 

Life Expectancy
Page 22 GAO-16-354 Longevity and Retirement

years.61 However, there are factors that make projecting life expectancy 

for women by income more difficult than for men.62 It is not unexpected 

for life expectancy estimates to vary as they depend, among other things, 

on the particular data sources, populations, and age ranges analyzed. 

While the studies we reviewed found a range of life expectancy 

differences by income, each of them finds that disparities exist.63

 61The Population Health Metrics study of U.S. life expectancy, 1985-2010, that found 

significant county level differences in life expectancy, by sex (described earlier in the 

background), reported finding effectively “no relationship” between life expectancy and 

county level per capita income. See Haidong Wang et al., 2013. However, another study 

that looked at county level mortality rates in 2010 found that the lower the household 

income, the higher the risk of premature death. See E.R. Cheng and D.A. Kindig, 

“Disparities in Premature Mortality between High- and Low-Income U.S. Counties,” 

Centers for Disease Control and Prevention (Mar. 28, 2012). A subsequent study by the 

same authors found that mortality among women rose in 43 percent of counties over two 

decades. The factors found to be most significantly associated with reductions in county 

level mortality rates for both men and women were: percentage of Hispanic residents, 

adults with a college degree, population density, and median household income. See 

David A. Kindig and Erika R. Cheng, “Even As Mortality Fell in Most U.S. Counties, 

Female Mortality Nonetheless Rose in 42.8 Percent of Counties from 1992 to 2006,” 

Health Affairs, Vol 32, No 3 (March 2013). 

62According to studies we reviewed, developing life expectancy estimates for women by 

income is more difficult than for men, in part because women’s income, on average, 

makes up a smaller share of household income. For example, women are more likely to 

work part time and earn less than men. Some studies have attempted to overcome this by 

using income calculations other than individual income for women—for example, using 

household income or using their spouses’ income. While these measures of income may 

alleviate some challenges, some experts believe estimates of life expectancy by income 

for women are still less reliable than such estimates for men. Further, it is difficult to 

assess changes in women’s life expectancy by income because women’s participation in 

the labor force and individual earnings have grown over the last several decades.

63Two of the studies we reviewed calculated mortality rates rather than life expectancy. 

While the results are not directly comparable, these studies found that individuals with 

lower incomes have higher mortality rates and therefore shorter life expectancy than those 

with higher incomes. 
Page 23 GAO-16-354 Longevity and Retirement

Table 3: Selected Studies’ Projected Life Expectancy over Time for Men Approaching Retirement, by Income Group 

Author (year)

Lifetime income 

groupings for 

comparison 

(lower-income to 

higher-income)

Age at which 

projected life 

expectancy 

calculated

Projected life expectancy for 

men by income group: 

Difference 

between lowerand higherincome groupsDifference compared 

to prior cohort (birth 

cohorts compared)

Lowerincome Higher-income

Bosworth, Burke 

(2014)

Second decile to 

second-highest 

decile

55 80.7 years 87.1 years 6.4 years Increased by 4 years 

(between the 1920 and 

1940 cohorts, for the 

top and bottom 

deciles)

Congressional 

Budget Office 

(2014)

Bottom quintile to 

top quintilea 65 89.5 years 95.7 years 6.2 years Increased by 2.8 years (between the 1949 and 

1974 cohorts)

Cristia (2009) Bottom quintile to 

top quintile

35 to 76 n/a n/a 3.6 years Increased by 0.9 years 

(between the 1983-

1997 and 1998-2003 

periods)

Goldman, Orszag 

(2014)

Bottom quartile to 

top quartile

65 80.2 years 85.7 years 5.5 years Increased by 2.4 years

(between the 1928 and 

1960 cohorts)

National Academy 

of Sciences (2015) 

Bottom quintile to 

top quintile

50 76.1 years 88.8 years 12.7 years Increased by 7.6 years 

(between the 1930 and 

1960 cohorts)

Waldron (2007) Bottom half to top 

half

65 81.1 years 86.5 years 5.3 years Increased by 4.7 years 

(between 1912 and 

1941 cohorts)

Source: GAO analysis of studies listed above. | GAO-16-354

Notes: This table includes studies we reviewed that estimate life expectancy by income over time for 

individuals approaching retirement age (see appendix I for full list of studies we reviewed). It excludes 

one study that estimates period life expectancy over time for white males and females only. Other 

studies we excluded that do not estimate life expectancy over time include two studies that estimate 

mortality rates, one study that estimates life expectancy for a hypothetical 1920 cohort and does not 

provide information on all races together, and one study that estimates life expectancy at age 25 by 

poverty threshold.

a

These estimates do not include Disability Insurance beneficiaries, who tend to have higher mortality 

rates than the general population.

Moreover, disparities in life expectancy by income have grown, according 

to the studies that examined trends over time (see table 3).64 Specifically, 

 64One additional study examined changes over time, but the projections were based on 

period life expectancy rather than cohort estimates, so we do not include them here. 
Page 24 GAO-16-354 Longevity and Retirement

all of the six studies we reviewed that examined trends over time found 

growth in life expectancy differences, ranging from 0.9 to 7.6 years for 

men, depending on the age, birth years, and measure of income used. 

For example, a 2007 study by SSA’s Hilary Waldron found that for men 

age 65 who were born in 1912, there was only a 0.7 year difference in 

expected years of life remaining between top and bottom earners, but for 

those born in 1941, the expected difference grew to 5.3 years (see fig. 

3).65 Similarly, for women, the studies we reviewed found differences in 

life expectancy by income were greater in more recent years, and the 

range in years was wider than for men. This is perhaps unsurprising, as 

some analysts have noted that disparities in household income also 

increased over time. According to a 2014 Congressional Budget Office 

(CBO) report, between 1979 and 2011, average real after-tax earnings for 

the top one percent of households grew about four times as fast as those 

in the lowest fifth.66

 65This estimate was for Social Security-covered males. Hilary Waldron, “Trends in 

Mortality Differentials and Life Expectancy for Male Social Security-Covered Workers, by 

Socioeconomic Status,” Social Security Bulletin, vol. 67, no. 3 (2007). 

66Congressional Budget Office, The Distribution of Household Income and Federal Taxes, 

2011 (Washington, D.C.: November, 2014). See also DeNavas-Walt, Carmen, and 

Proctor, Bernadette D., Income and Poverty in the United States: 2014 (Washington, D.C.: 

U.S. Census Bureau, September 2015). 
Page 25 GAO-16-354 Longevity and Retirement

Figure 3: Differences in Projected Years Remaining for Men, by Income Group

While higher-income groups have experienced significant growth in their 

life expectancy at older ages, lower-income groups have either 

experienced less growth or declines in recent decades, according to 

studies we reviewed. For example, Waldron’s 2007 study projected that 

65-year-old men born in 1941 with below-median earnings would live 1.3 

years longer than their counterparts born in 1912, while 65-year-old men 

born in 1941 with above-median earnings would live 6 years longer than 

their counterparts born in 1912. Some other studies estimate that life 

expectancy declined for those in the bottom of the income distribution. 

For instance, a 2015 study by the National Academy of Sciences found 

that life expectancy at age 50 has declined for both men and women in 
Page 26 GAO-16-354 Longevity and Retirement

the bottom income quintile.67 Specifically, men and women in the bottom 

income quintile saw life expectancy decreases of 0.5 and 4 years, 

respectively, when comparing the 1930 and 1960 cohorts. While the 

studies we reviewed do not all agree about whether life expectancy is 

decreasing or increasing slightly for the lowest earners, they all agree that 

the higher-income groups are gaining more years than the lower-income 

groups.68

Some studies show that there are disparities in life expectancy by other 

characteristics that have been linked with income, such as race and 

education. For example, the CDC reported that the life expectancy for 65-

year-old black individuals was 1.2 years less than for their white 

counterparts in 2013.69 Other studies have also examined links with 

education and found that individuals with a high school degree or less 

 67National Academies of Sciences, Engineering, and Medicine, The Growing Gap in Life 

Expectancy by Income: Implications for Federal Programs and Policy Responses 

(Washington, D.C.: The National Academies Press, 2015). 

68Some studies have found that higher-income individuals’ life expectancy has benefitted 

most from health improvements, such as reduced smoking rates. For example, Bosworth, 

Burtless, and Zhang found a significant decline in the risk of dying from cancer or heart 

conditions for older Americans with above-average lifetime incomes but not for those with 

below-average incomes. See Barry P. Bosworth, Gary Burtless, and Kan Zhang, Sources 

of Increasing Differential Mortality among the Aged by Socioeconomic Status (Chestnut 

Hill, MA: Center for Retirement Research at Boston College, June 2015). For a related 

study by these authors, see also Barry Bosworth, Gary Burtless, and Kan Zhang, Later 

Retirement, Inequality in Old Age, and the Growing Gap in Longevity between Rich and 

Poor (Washington, D.C.: The Brookings Institution, Feb. 12, 2016).

69National Center for Health Statistics, Health, United States, 2014: With Special Feature 

on Adults Aged 55-64 (Hyattsville, MD: 2015). In addition, in contrast to the findings for 

black individuals, according to studies we reviewed, Hispanic individuals tend to live 

longer than non-Hispanic individuals, even though they have lower average education and 

income, which are factors typically associated with shorter life expectancy. For example, 

the National Center for Health Statistics at the CDC estimates that in 2013, Hispanic men 

at age 65 could expect to live approximately 1 to 3 years longer than their white and black 

counterparts, respectively, while Hispanic women could expect to live nearly 2 to 3 years 

longer. (National Center for Health Statistics, 2015.) Though the cause is unclear, some 

research has suggested that their longer life expectancy is related to the health of 

immigrants (Hispanic immigrants are healthier, on average, than those who do not 

migrate) or cultural factors such as kinship networks, and that this anomaly will diminish 

with subsequent generations. “The Health and Life Expectancy of Older Blacks and 

Hispanics in the United States,” Today’s Research on Aging, Issue 28 (Population 

Reference Bureau, June 2013).
Page 27 GAO-16-354 Longevity and Retirement

tend to have shorter lives than those with a college education.70 However, 

because the primary focus of our analysis was on life expectancy for 

adults approaching retirement by income group, we did not conduct a 

complete review of the studies related to other characteristics.

Lower-income individuals generally rely on Social Security as their 

primary source of retirement income, so their retirement security is 

affected most by how that program is structured. We found that when 

differences in life expectancy by income are factored in, the amount of 

projected lifetime benefits received by lower-income individuals is 

reduced, while the amount of projected lifetime benefits received by 

higher-income individuals is increased. As a result, although the formula 

for calculating monthly Social Security retirement benefits is 

progressive—replacing a greater percentage of a lower-income than a 

higher-income worker’s pre-retirement income on a monthly basis—

differential life expectancy reduces the progressivity of Social Security 

benefits received over a lifetime.71

Social Security is the largest determinant of lower-income individuals’ 

retirement security because, for most such individuals, it is the main 

source of their retirement income. In a previous report, we analyzed data 

from the 2013 Survey of Consumer Finances and estimated that 86 

percent of recent retiree households in the lowest income quintile rely on 

 70For other studies that examine race and education, see S. Jay Olshansky et al., 

“Differences in Life Expectancy Due to Race and Educational Differences are Widening 

and Many May Not Catch Up,” Health Affairs, 31, no. 8 (2012): 1803-1813; and John 

Bound et. al, The Implications of Differential Trends in Mortality for Social Security Policy

(Ann Arbor, MI: Michigan Retirement Research Center, University of Michigan, October 

2014). For example, the 2012 study found that a 65-year-old college-educated black man 

could expect to live, on average, 1.9 years less than a white man with the same age and 

education.

71We focused our analysis on Social Security because it is the main source of retirement 

income for most lower-income individuals. We did not analyze the effect of differential life 

expectancy on other retirement resources, such as retirement savings and DB plans, nor 

did we analyze the adequacy of these retirement resources. 

Differences in Life 

Expectancy Result in 

Reduced Projected 

Lifetime Social Security 

Benefits for Lower-Income 

Groups

Lower-Income Groups Rely 

Primarily on Social Security
Page 28 GAO-16-354 Longevity and Retirement

Social Security for the majority of their income.72 About half of recent 

retiree households in the lowest income quintile rely on Social Security for 

more than 90 percent of their income. Overall, in that report we found that 

those with lower incomes have more limited resources for retirement 

aside from Social Security.

Recent retiree households in the lowest income quintile are much less 

likely to have retirement savings and DB plans than those in higher 

quintiles.73 Specifically, as we previously found, only 9 percent have any 

retirement savings (compared to 84 percent in the top income quintile) 

and 19 percent have a DB plan (compared to 65 percent in the top 

income quintile), which typically provides a monthly stream of retirement 

income for life. Households without retirement savings have few other 

resources, we found, which puts them at a high risk of outliving their nonSocial Security resources. One reason for the lack of retirement savings 

among lower-income individuals is their lack of access to employersponsored retirement savings plans. As we reported in 2015, coverage by 

and participation in workplace retirement savings programs are also lower 

among lower-income workers. Specifically, workers in the lowest income 

quartile were nearly four times less likely than workers in the highest 

income quartile to work for an employer that offers a retirement savings 

program, after controlling for other factors.74 Similarly, we found that 

approximately 14 percent of workers in the lowest income quartile 

participated in a workplace retirement savings program compared to 76 

percent of those in the highest income quartile.

 72See GAO-15-419. The Survey of Consumer Finances is a nationally representative 

study sponsored by the Board of Governors of the Federal Reserve. “Recent retiree 

households” refers to households headed by someone age 65 to 74. For the estimate of 

86 percent, we are 95 percent confident that the percentage is between about 81 and 91 

percent. Similarly, for the estimate of half in the next sentence, we are 95 percent 

confident that the percentage is between about 41 and 57 percent.

73GAO-15-419. For purposes of that report, “retirement savings” includes assets in DC 

plans, such as 401(k) plans, and IRAs. It does not include the value of DB plans unless 

the DB plan benefit has been taken as a lump sum and converted into an IRA or other 

account balance. It also does not include home equity or savings held outside of a 

retirement account.

74GAO-15-556. For purposes of that report, “workplace retirement savings program” 

includes employee benefit plans, such as 401(k) plans, and employer-provided IRAs, such 

as payroll deduction IRAs. It did not include IRAs that individuals may establish on their 

own outside the workplace. 
Page 29 GAO-16-354 Longevity and Retirement

According to our analysis, shorter-than-average life expectancy for lowerincome individuals results in a projected reduction in lifetime Social 

Security benefits received. We calculated the projected lifetime Social 

Security benefits that would be received for men in various hypothetical 

scenarios to illustrate the effect of lower-than-average life expectancy on 

lower-income groups (which we defined as those with individual annual 

incomes at the 25th percentile, or about $20,000, according to Census 

data).75 Our analysis indicates that, on average, the projected lifetime 

benefits for these lower-income individuals would be reduced by as much 

as 11 to 14 percent due to their shorter-than-average life expectancy (or 

“differential” life expectancy) when compared to what they would receive 

if they had an average life expectancy (see fig. 4).76

 75Our analysis looked at individual income groups at the 25th and 75th percentiles (which 

we refer to as lower- and higher-income in our scenarios) because Waldron’s 2007 study 

produced estimates for the top and bottom half of lifetime income, and these percentiles 

represent the mid-point for each group. Based on this and an analysis of Census data, we 

used $20,000 as the lower income (which is roughly 160 percent of the U.S. Census 

Bureau’s 2014 federal poverty threshold for a single householder under 65), and $80,000 

as the higher income (which is roughly 650 percent of the same federal poverty threshold). 

For details on how we constructed our scenarios, see appendix II.

76Our analysis used two sets of life expectancy estimates: (1) Hilary Waldron’s 2007 

estimates of life expectancy by income for the 1941 cohort and (2) SSA’s actuarially 

assumed (average) life expectancy for the 1941 cohort, based on the intermediate 

assumptions of the 2015 Trustees Report. For our purposes, we assigned a birth year of 

1953 for our scenario individuals and assumed the life expectancy experiences of the 

1941 cohort in order to incorporate the life expectancy estimates from Waldron’s 2007 

study. As most studies we reviewed found increasing disparities in life expectancy, our 

use of this study may underestimate the effect of life expectancy differences for more 

recent cohorts.

In addition, our analysis looked at life expectancy for men because we used Hilary 

Waldron’s 2007 estimates of life expectancy by income, which did not include women. 

However, we believe the general conclusions we drew from our scenarios apply to all 

individuals, in part because studies we reviewed found that lower-income women also 

have shorter life expectancies than higher-income women. 

Shorter Life Expectancy 

Results in Lower Projected 

Lifetime Benefits
Page 30 GAO-16-354 Longevity and Retirement

Figure 4: Shorter Life Expectancy Leads to Reduced Projected Lifetime Social 

Security Retirement Benefits for Lower-Income Men

For example, our calculations show that for a hypothetical 62-year-old 

man in the lower-income group:

• If he were to claim Social Security benefits now, and live to age 83

(the average life expectancy for men age 62 in the United States), 
Page 31 GAO-16-354 Longevity and Retirement

he would receive an estimated $156,000 over his lifetime, or about 7.8 

times his current income.77

• If he were to claim Social Security benefits now, and live to age 80 

(the differential life expectancy for 62-year-old men in his income 

group), he would receive an estimated $138,000 over his lifetime, or 

about 6.9 times his current income, a reduction of 11 percent.

However, if a man in the lower-income group delayed claiming Social 

Security until age 70, the maximum age that will result in increased 

monthly benefits, and then lived until age 83 (the differential life 

expectancy for 70-year-old men in his income group), he would receive 

an estimated $185,000, or a 14 percent reduction in his lifetime benefits 

when compared to what he would receive if he lived until age 85 (the 

average life expectancy for 70-year-old men).

78

We also calculated the projected lifetime Social Security benefits that 

would be received for men in the same hypothetical scenarios to illustrate 

the effects of differential life expectancy on higher-income groups (which 

we defined as those with individual annual incomes at the 75th percentile, 

or about $80,000, according to Census data). In contrast to lower-income 

individuals, higher-than-average life expectancy for higher-income 

individuals results in an increase in lifetime Social Security benefits 

received when compared to average life expectancy—as much as 16 to 

18 percent (see fig. 5).

 77These scenarios are illustrative in nature and should not be used to predict future 

outcomes. It is possible that the 1941 cohort, whose life expectancy data we used, are 

different than past or future cohorts. The dollar amounts are not adjusted for present value 

for simplicity and in order to focus on the effects of differential life expectancy. We also 

performed our calculations with adjustments for present value and found results consistent 

with our basic finding, in this case that shorter life expectancy results in reduced average 

present value of lifetime Social Security benefits. For present value adjusted figures, see 

appendix II. 

78As noted in the background, life expectancy at an older age is greater than at a younger 

age, since the averages for older persons do not include those who have died before that 

age. Thus, for the purposes of our scenarios, when we describe projected lifetime benefits 

for an individual who delays claiming until a given age, we assume that the individual 

reached that claiming age and therefore has the corresponding longer life expectancy. 
Page 32 GAO-16-354 Longevity and Retirement

Figure 5: Longer Life Expectancy Leads to More Projected Lifetime Social Security 

Retirement Benefits for Higher-Income Men

For example, our calculations show that for a hypothetical 62-year-old 

man in the higher-income group:

• If he were to claim Social Security benefits now and live to age 83 

(the average life expectancy for men age 62 in the United States), 

he would receive an estimated $355,000 over his lifetime, or about 4.4 

times his current income.

• If he were to claim Social Security benefits now and live to age 86 

(the differential life expectancy for 62-year-old men in his income 

group), he would receive an estimated $411,000 over his lifetime, or 

about 5.1 times his current income, an increase of 16 percent.
Page 33 GAO-16-354 Longevity and Retirement

However, if a man in the higher-income group delayed claiming Social 

Security until age 70, the maximum age that will result in increased 

monthly benefits, and then lived until age 88 (the differential life 

expectancy for 70-year-old men in his income group), he would receive 

an estimated $595,000, or an 18 percent increase in his lifetime benefits 

when compared to what he would receive if he lived until age 85 (the 

average life expectancy for 70-year-old men).

Rather than claiming benefits when first eligible at age 62, it is often 

beneficial for individuals to delay claiming Social Security benefits 

because it results in larger monthly benefits.79 However, lower-thanaverage life expectancy may reduce the value of delayed claiming of 

benefits for lower-income individuals. For example, in our scenarios, 

shorter life expectancy reduces the added lifetime benefit of delaying 

claiming until age 70 (compared to early claiming at age 62) by nearly 

two-thirds of one year’s earnings for a lower-income man.80 In addition, it 

may be more difficult for a low-income individual to delay claiming, for 

example, after a job loss or a depletion of retirement savings.81 While 

many factors may influence someone’s decision about when to claim 

benefits—such as when a spouse claims—deciding when to claim 

benefits may be particularly important for women, who tend to have lower 

earnings but longer lives than men.

Social Security’s formula for calculating monthly benefits is progressive—

that is, it provides a proportionally larger monthly earnings replacement 

for lower-earners than for higher-earners.82 However, our analysis of SSA 

 79GAO-14-311.

80These amounts could change using a different claiming age and comparison age. 

81Moreover, in a previous report, we found that a much smaller share of people in 

professional or managerial occupations claimed benefits prior to their full retirement age 

when compared to blue-collar and other workers. GAO-14-311.

82Retired workers with relatively lower average career earnings receive monthly benefits 

that, on average, equal about half of what they made while working, while workers with 

relatively higher career earnings receive benefits that equal about 30 percent of prior 

earnings. See the background section of this report for more information. 

It is important to note that Social Security’s progressive benefits formula cannot make up 

for all social inequalities, be they related to health, life expectancy, labor market forces, or 

other issues. Additionally, Social Security benefits are not adjusted for life expectancy 

differences by income or for “adverse selection,” meaning the possibility that workers in 

good health may tend to commence benefits at a later age than workers in poor health.

Lower Projected Lifetime 

Benefits Result in Reduced 

Progressivity
Page 34 GAO-16-354 Longevity and Retirement

data indicates that life expectancy differences reduce the size of this 

progressivity over a beneficiary’s lifetime (see fig. 6). Specifically, 

differential life expectancy results in reduced projected lifetime benefits 

for lower-income groups and increased projected lifetime benefits for 

higher-income groups, relative to average life expectancy, thereby 

decreasing the lifetime progressivity of the program. Moreover, studies 

we reviewed suggest the gap in life expectancy has grown. If the gap 

continues to grow, the progressivity in Social Security’s lifetime benefits 

will likely continue to decrease.

Figure 6: Shorter Life Expectancy Leads to Proportionally Less Lifetime Social 

Security Retirement Benefits for Hypothetical Lower-Income Men

Although present value adjustments are an important economic tool to 

account for the time value of money, we chose to use unadjusted figures 

in our scenarios for several reasons, but primarily because of our focus 

on the effects of differential life expectancy, including the importance of 

benefits at older ages.83 Our analysis shows that it is at these older ages 

when life expectancy differences predict that some income groups will 

 83For a more complete discussion of our reasons, see appendix II.
Page 35 GAO-16-354 Longevity and Retirement

receive, on average, more or fewer years of benefits. However, in 

appendix II, we also provide calculations with adjustments for present 

value. These present value adjusted figures are consistent with our basic 

findings—that differential life expectancy reduces the lifetime 

progressivity of Social Security retirement benefits—though the 

magnitude of the reduction in progressivity is somewhat smaller because 

the adjustments discount the value of money received in the future.

Six studies we reviewed also examined the impact of life expectancy 

differences by income group, and they also generally found that 

differences in life expectancy by income erode the lifetime progressivity of 

Social Security benefits.84 For example, the 2015 National Academy of 

Sciences study found that the lifetime retirement benefits advantage of 

the top income quintile over the bottom income quintile had grown by 

$70,000 (on a present value basis) because of increases in life 

expectancy differences between 1930 and 1960. Moreover, when 

considering lifetime benefits from additional government programs, the 

study found that the change in life expectancy has made these programs 

less progressive.85 Another study, conducted for the National Bureau of 

Economic Research in 2011, indicated that when differences in life 

expectancy are taken into account, Social Security retirement benefits 

may have become regressive for some groups. For example, the study 

found that men in the 75th income percentile earned a higher rate of 

return from Social Security (based on benefits received compared to 

taxes paid) than do men in the 25th income percentile.86

 84Three additional studies examined this topic but did not describe the distribution of 

Social Security benefits. See appendix I for relevant studies. 

85The government programs in this study included Medicare, Medicaid, Social Security 

(including retirement and Disability Insurance), and Supplemental Security Income.

86Gopi Shah Goda, John B. Shoven, and Sita Nataraj Slavov, “Differential Mortality by 

Income and Social Security Progressivity,” in Explorations in the Economics of Aging, ed. 

David A. Wise (Chicago, IL: March 2011). Another study concluded that life expectancy 

differences “work counter to Social Security’s statutory redistribution,” but it described the 

effects as “modest at best.” Specifically, it found that the estimates of progressivity are 

more affected by methodological factors used to estimate redistribution, such as how one 

chooses to calculate net returns or classify subgroups. Amy Rehder Harris and John 

Sabelhaus, How Does Differential Mortality Affect Social Security Finances and 

Progressivity, Working Paper 2005-05 (Washington, D.C.: Congressional Budget Office, 

May 2005).
Page 36 GAO-16-354 Longevity and Retirement

One frequently-cited option to address increasing average life expectancy 

and Social Security’s long-term financial challenges is increasing the 

early and full retirement ages.87 While other options exist, such as 

changing payroll tax contributions or the structure of benefits , raising the 

retirement age can be considered a direct response to increasing life 

expectancy. 88 We adjusted our hypothetical scenario calculations to 

illustrate the effect of increasing these retirement ages and found that 

taking such action could more negatively affect lower-income individuals 

because of their shorter life expectancy. Specifically, we calculated the 

effect of increasing all retirement ages by 2 years and found that the 

overall projected lifetime benefit is reduced more for lower-income men 

than for higher-income men, given their different life expectancy.89 For 

example, compared to the amount of benefits received under current 

program requirements, if retirement ages were increased by 2 years:

• A man in the lower-income group retiring at the increased full 

retirement age would receive lifetime benefits that are reduced by the 

equivalent of over two-thirds of his current annual income, 

assuming he lived to the average age expected for his income group.

• A man in the higher-income group retiring at the increased full 

retirement age would receive lifetime benefits that are reduced by the 

 87As we reported in 2015, raising the early retirement age alone could worsen solvency for 

the Social Security trust funds. GAO-16-75SP. In this report, we are not recommending or 

endorsing the adoption of any particular policy option or package of options. Rather, we 

identified options from existing literature and expert interviews as potential options that 

could be considered.

88We chose to examine increasing the retirement age in our scenarios for this reason and 

because it was methodologically feasible, whereas other options would have required a 

number of assumptions and calculations that we would not have been able to incorporate 

into our methodology. 

89We adjusted our calculations so that the early and full retirement ages both increased by 

2 years. For example, we assumed that the benefit amount received at age 62 (the current 

early retirement age) would now be received at age 64. The maximum age at which 

individuals could receive increased monthly benefits in this scenario increases from age 

70 to age 72. Also, it is possible that, should the retirement ages be raised, there may be 

changes to other aspects of the formula, such as to the benefit reductions for early 

claiming or to the benefit increases for delayed claiming; however, for purposes of our 

analysis, we assumed no other changes to the monthly benefit formula. Further, we did 

not calculate changes to any retirement age in isolation because this was not possible 

using the quick calculator. Finally, we wanted to limit the number of assumptions about 

changes to the benefits formula that would be required by changing the early or full 

retirement age in isolation.

Raising the Retirement 

Age May More Negatively 

Affect Lower-Income 

Groups
Page 37 GAO-16-354 Longevity and Retirement

equivalent of nearly half of his current annual income, assuming 

he lived to the average age expected for his income group.

A 2014 CBO study also examined the effect of raising the full and early 

retirement ages and found that it would reduce lifetime benefits more for 

lower-income groups than for higher-income groups, relative to payroll

taxes paid.90 While the CBO study found that raising the early and full 

retirement ages together resulted in a slight benefit decrease both for 

lower- and higher-income individuals, it also found that, if life expectancy 

disparities continue to increase, raising the retirement ages would lead to 

larger declines in lifetime benefits for lower-income individuals than for 

higher-income individuals, relative to the Social Security taxes they pay.

The 2015 National Academy of Sciences study similarly found that raising 

the full retirement age would lead to proportionately lower lifetime benefits 

for lower-income groups because of life expectancy differences. 

Specifically, the study found that raising the full retirement age to 70 

resulted in reducing lifetime benefits for men with income in the bottom 

quintile by 25 percent, while reducing lifetime benefits for men with 

income in the top quintile by 20 percent.91 The National Academy of 

Sciences study further reported that raising the early retirement age 

together with the full retirement age would lead to similar results (a larger 

benefit decrease for lower-income groups than higher-income groups).92

While researchers sometimes suggest that workers could adjust to an 

increased retirement age by working longer, our prior work has shown 

that this may not be feasible for many who are low-income workers. In a 

 90This study calculated the ratio of mean lifetime benefits to mean lifetime payroll taxes 

(on a present value basis). Joyce Manchester, Michael Simpson, and Geena Kim, 

Implications of Differential Mortality for Analyses of Social Security Policy Options,

Presentation to the 2014 Fall Research Conference of the Association of Public Policy and 

Management (Washington, D.C.: Congressional Budget Office, Nov. 7, 2014). 

91This study calculated net present values of benefits (that is, benefits received minus 

taxes paid) adjusted to age 50. Also, instead of comparing benefits to income, as we did, 

this study examined progressivity by comparing the present value of net benefits to 

wealth. For life expectancy estimates used in this study, see table 3 earlier in this report. 

While these estimates differ from the estimates we used in our scenarios (Waldron, 2007), 

the results are consistent with our finding that raising the retirement age would lead to 

proportionately lower lifetime benefits for lower-income groups.

92With respect to the early retirement age, the National Academy of Sciences study found 

that raising it in isolation would make the Social Security retirement benefits slightly less 

progressive.
Page 38 GAO-16-354 Longevity and Retirement

2014 report, we concluded that people who claim Social Security benefits 

early, such as those with physically-demanding blue collar jobs, may have 

done so because they faced challenges continuing to work at older 

ages.93 Similarly, in a 2010 report, we noted that many older workers 

could face health or physical challenges that would prevent them from 

working longer.94 For example, in that report we found that the workers 

who report more difficulty working longer and postponing retirement due 

to work-limiting health conditions tend to have less education and lower 

household income than those who do not report health limitations. For 

these individuals, raising the early or full retirement age could erode an 

important safety net.

Some policies have been proposed to mitigate the potential adverse 

effects of raising the early or full retirement age on those with lower 

incomes and shorter life expectancies.95 For example, some researchers 

have suggested making early or full retirement ages lower for those with 

lower lifetime earnings, though others have suggested that this may be 

difficult to implement.96 Some experts we spoke with also suggested that 

eligible, lower-income individuals could receive Disability Insurance to 

bridge the gap created by raising the early retirement age, though the 

Disability Insurance program is also under financial pressure.97

As we reported in 2009, concerns about vulnerable populations have led 

to proposals to restructure Social Security benefits to help these groups.98

For example, we reported on proposals to guarantee a minimum benefit, 

 93GAO-14-311.

94GAO-11-125.

95We did not evaluate these proposals or their effects, nor do we recommend or endorse 

the adoption of any particular policy option or package of options. Rather, we identified 

them from existing literature and expert interviews as potential options that could be 

considered.

96See for example Natalia Zhivan et al., An ‘Elastic’ Earliest Eligibility Age for Social 

Security (Chestnut Hill, MA: Center for Retirement Research at Boston College, February 

2008). See also Hilary Waldron, “Mortality Differentials by Lifetime Earnings Decile: 

Implications for Evaluations of Proposed Social Security Law Changes,” Social Security 

Bulletin, vol. 43, no. 1 (2013). 

97GAO-16-75SP.

98GAO, Social Security: Options to Protect Benefits for Vulnerable Groups When 

Addressing Program Solvency, GAO-10-101R (Washington, D.C., Dec. 7, 2009). 
Page 39 GAO-16-354 Longevity and Retirement

supplement benefits for low-income single workers, or increase survivors 

benefits. Another identified proposal would provide an additional Social 

Security benefit to those over the age of 80 or 85, which may be 

particularly helpful for low-income women.99 These proposals could have 

a negative effect on the projected long-term solvency of Social Security, 

although compensating revisions could help moderate costs.

Therefore, in sum, proposals to address Social Security’s financial 

challenges may affect different groups differently. Lower-income groups, 

in particular, may be more adversely affected by certain proposed 

changes because they are more reliant on Social Security retirement 

benefits and because they have shorter-than-average life expectancy. It 

is important that any proposals to change the Social Security program 

take into account how disparities in life expectancy affect the total 

benefits received by different groups over their lifetimes.

We provided a draft of this report to the U.S. Department of Labor, the 

U.S. Department of the Treasury, the Internal Revenue Service, and the 

Social Security Administration for their review and comment. SSA 

provided comments, reproduced in appendix IV, agreeing with our finding 

that it is important to understand how the life expectancy in different 

income groups may affect retirement income. SSA also provided 

technical comments, as did each of the other agencies, which we 

incorporated as appropriate. 

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to appropriate congressional 

committees, the Secretary of Labor, the Secretary of the Treasury, the 

Commissioner of the Internal Revenue Service, the Acting Commissioner 

of Social Security, and other interested parties. In addition, the report will 

be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

 99See also GAO-12-699.

Agency Comments 
Page 40 GAO-16-354 Longevity and Retirement

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix V.

Sincerely yours,

Charles A. Jeszeck

Director, Education, Workforce and Income Security
Appendix I: List of Selected Studies on Life 

Expectancy Differences, by Income

Page 41 GAO-16-354 Longevity and Retirement

To examine the effect of life expectancy on the retirement resources for 

different groups, especially those with low incomes, we analyzed 11 

studies that estimated life expectancy or mortality for different income 

groups and 9 studies that described the effect of these differences 

regarding Social Security retirement benefits, and in some cases, the 

studies also included Social Security disability benefits. These studies are

listed in table 4 below. We selected these studies based on our review of 

longevity studies identified through expert referral and an Internet search, 

focusing on those that were published in the past 10 years and that 

included an analysis of effects by income groups. We limited our review 

to those that were published by government agencies, research 

organizations, or other scholarly publications, used data from accepted 

sources (such as the University of Michigan Health and Retirement Study 

or SSA administrative data), and had findings we determined were valid 

for our purposes.

Table 4: Selected Studies on Life Expectancy Differences, by Income

Estimated life 

expectancy or 

mortality for different 

income groups 

Described the effect of 

these differences 

regarding Social 

Security 

Baker, Dean, and Rosnick, David. “The Impact of Income Distribution on the 

Length of Retirement.” (Washington, D.C.: Center for Economic and Policy 

Research, October 2010).

X

Bosworth, Barry P., and Burke, Kathleen. “Differential Mortality and Retirement 

Benefits in the Health and Retirement Study.” (Chestnut Hill, MA: Center for 

Retirement Research at Boston College, April 2014).

X X

Cristia, Julian P. Rising Mortality and Life Expectancy Differentials by Lifetime 

Earnings in the United States. Working Paper 665 (Washington, D.C.: InterAmerican Development Bank, January 2009). 

X

Congressional Budget Office. The 2014 Long-Term Budget Outlook

(Washington, D.C.: July 2014).

X

Duggan, James E., Gillingham, Robert, and Greenlees, John S. Mortality and 

Lifetime Income: Evidence from Social Security Records, Research Paper No. 

2007-01 (Washington, D.C.: U.S. Department of Treasury, December 2006).

X

Goda, Gopi Shah, Shoven, John B., and Slavov, Sita Nataraj. “Differential 

Mortality by Income and Social Security Progressivity,” in Explorations in the 

Economics of Aging, edited by David A. Wise (Chicago, IL: University of 

Chicago Press, March 2011): 189-204.

X

Goldman, Dana P., and Orszag, Peter R. “The Growing Gap in Life Expectancy: 

Using The Future Elderly Model to Estimate Implications for Social Security and 

Medicare,” American Economic Review: Papers & Proceedings, vol. 104, no. 5 

(2014): 230-233.

X X

Appendix I: List of Selected Studies on Life 

Expectancy Differences, by Income
Appendix I: List of Selected Studies on Life 

Expectancy Differences, by Income

Page 42 GAO-16-354 Longevity and Retirement

Estimated life 

expectancy or 

mortality for different 

income groups 

Described the effect of 

these differences 

regarding Social 

Security 

Harris, Amy Rehder, and Sabelhaus, John. “How Does Differential Mortality 

Affect Social Security Finances and Progressivity.” Working Paper 2005-05 

(Washington, D.C.: Congressional Budget Office, May 2005).

X

Manchester, Joyce, and Topoleski, Julie. “Growing Disparities in Life 

Expectancy.” (Washington, D.C.: Congressional Budget Office, April 17, 2008). 

X

Manchester, Joyce, Michael Simpson, and Geena Kim. “Implications of 

Differential Mortality for Analyses of Social Security Policy Options: 

Presentation to the 2014 Fall Research Conference of the Association of Public 

Policy and Management.” (Washington, D.C.: Congressional Budget Office, 

Nov. 7, 2014).

X

National Academies of Sciences, Engineering, and Medicine. The Growing Gap 

in Life Expectancy by Income: Implications for Federal Programs and Policy 

Responses. Committee on the Long-Run Macroeconomic Effects of the Aging 

U.S. Population-Phase II. Committee on Population, Division of Behavioral and 

Social Sciences and Education. Board on Mathematical Sciences and Their 

Applications, Division on Engineering and Physical Sciences. (Washington, 

D.C.: The National Academies Press, 2015).

X X

Pijoan-Mas, Josep and Ríos-Rull, José-Víctor. “Heterogeneity in Expected 

Longevities.” Demography, vol 51 (November 2014): 2075-2102.

X

Robert Wood Johnson Foundation. Overcoming Obstacles to Health (Princeton, 

NJ: February 2008).

X

Society of Actuaries. RP-2014 Mortality Tables Report (Schaumburg, IL: 

November 2014).

X

Waldron, Hilary. “Trends in Mortality Differentials and Life Expectancy for Male 

Social Security-Covered Workers, by Socioeconomic Status.” Social Security 

Bulletin, vol. 67, no. 3 (2007).

X

Waldron, Hilary. “Mortality Differentials by Lifetime Earnings Decile: Implications 

for Evaluations of Proposed Social Security Law Changes.” Social Security 

Bulletin, vol. 73, no. 1 (2013).

X X

Source: GAO analysis of studies published in the last 10 years. | GAO-16-354

Note: In some cases the studies included both Social Security retirement and disability benefits. 
Appendix II: Scenario Calculation Methodology 

and Additional Examples

Page 43 GAO-16-354 Longevity and Retirement

To examine the effect of life expectancy on the retirement resources for 

different groups, especially those with low incomes, we developed 

scenarios to illustrate how disparities in average life expectancy by 

income group affect the average amount of lifetime Social Security 

retirement benefits received. While our report discusses various forms of 

retirement resources, for our scenarios we compare only projected 

lifetime Social Security benefits against current income. We do not factor 

in other resources that an individual may draw upon in retirement, which 

could include (but are not limited to) future payments from employersponsored defined benefit plans, retirement savings accounts, or housing 

equity. Scenarios that included these other retirement resources could 

show different outcomes. However, we focused on Social Security 

because it is the primary source of income for most people with lowerincomes. Moreover, other retirement resources are much less prevalent 

in this population.1 We reviewed relevant studies and U.S. Census 

Bureau (Census) data to determine our scenario assumptions, such as 

life expectancy by income group, and we calculated monthly Social 

Security benefits using the Social Security Administration’s (SSA) quick 

calculator.2 We chose to use the quick calculator because it is 

transparent, publicly available, and produces quick, approximate 

estimates using a methodology developed by SSA actuaries.

These scenarios are illustrative in nature and should not be used to 

determine future outcomes for a particular individual. In addition to 

gathering input from internal experts, we sought and incorporated 

feedback on our methodology from one of the co-chairs for a recent study 

on life expectancy by income by the National Academy of Sciences.3 All 

figures are in 2015 dollars. We assessed the reliability of the data we 

used by reviewing relevant documentation and interviewing 

knowledgeable agency officials. We found the data to be reliable for the 

purposes used in this report.

 1

GAO-15-419.

2

http://www.ssa.gov/oact/quickcalc/, accessed December 10, 2015. 

3

National Academies of Sciences, Engineering, and Medicine. The Growing Gap in Life 

Expectancy by Income: Implications for Federal Programs and Policy Responses

(Washington, D.C.: The National Academies Press, 2015).

Appendix II: Scenario Calculation 

Methodology and Additional Examples
Appendix II: Scenario Calculation Methodology 

and Additional Examples

Page 44 GAO-16-354 Longevity and Retirement

We made several assumptions in our scenario calculations, the most 

important of which is the life expectancy estimate for income groups. We 

identified and reviewed 11 relevant studies published in the past decade 

(see app. I) and ultimately used the life expectancy estimates from a 2007 

study by SSA’s Hilary Waldron.4 We chose this study primarily because it 

produced cohort life expectancy estimates at a number of ages at which 

an individual can claim Social Security retirement benefits.5 Other 

advantages of the 2007 Waldron study are that it relies on comprehensive 

data on Social Security-covered workers that is not generally available to 

other researchers, it describes patterns over several decades, and it 

measures earnings over a multi-year period rather than just over a single 

year.6 Moreover, the study’s life expectancy estimates are in-line with 

other estimates7 and they are used in two of nine studies we identified 

that describe the effects of life expectancy disparities.8

Although we found it sufficient for our purposes, the 2007 Waldron study 

had some notable drawbacks. First, it produces estimates only for Social 

Security-covered men. Despite this drawback, we believe the estimates 

are appropriate for our purposes because the vast majority (94 percent) 

of workers are covered by Social Security, according to SSA,9 and 

because a number of researchers have raised questions about the 

reliability of life expectancy estimates by income group for women. 

 4

Hilary Waldron, “Trends in Mortality Differentials and Life Expectancy for Male Social 

Security-Covered Workers, by Socioeconomic Status,” Social Security Bulletin, vol. 67, 

no. 3 (2007).

5

“Cohort life expectancy” can be distinguished from “period life expectancy.” Period life 

expectancy is a based on a cross-section, by age, of the mortality rates of a population 

during a particular time period, and does not adjust for changes in mortality rates over 

time. In contrast, cohort life expectancy is based on longitudinal estimates of the mortality 

rates a population will experience over time, incorporating any expected improvements in 

mortality rates over time. Cohort life expectancy is generally considered a more 

appropriate estimate of how long a group can expect, on average, to live.

6

The study describes lifetime earnings as individual earnings between ages 45 and 55. 

7

See table 3 in this report, which summarizes the life expectancy estimates of other 

studies we considered. A few additional studies produced mortality estimates, which we 

did not use in our scenario calculations. 

8

See appendix I.

9

This is as of 2014, the most recent data available. Social Security Administration, Annual 

Statistical Supplement to The Social Security Bulletin, 2014, SSA Publication No. 13-

11700 (Washington, D.C.: April 2015).

Life Expectancy Estimates 

by Income
Appendix II: Scenario Calculation Methodology 

and Additional Examples

Page 45 GAO-16-354 Longevity and Retirement

Second, the estimates are broken-out by those in the top and bottom half 

of the earnings distribution. While it would have been useful to have a 

finer break-out by earning groups, the estimates were sufficient for our 

purposes to describe the effects on individuals with income at the 25th 

and 75th percentiles (which we describe as lower- and higher- income, 

respectively). One final drawback is that the study produces life 

expectancy estimates for individuals born in 1941, who are now past 

retirement age. It is possible that this cohort is different than past or future 

cohorts. In particular, given that most studies we reviewed found 

increasing disparities in life expectancy, our use of this study may 

underestimate the effect of life expectancy differences for more recent 

cohorts.

In order to calculate lifetime benefits using SSA’s quick calculator, we 

assumed a set of characteristics for two hypothetical individuals, both 

men (given the limitations of life expectancy estimates for women). One 

individual was assumed to have an income in the bottom half of the 

individual income distribution, and the other an income in the top half. For 

the mid-point of each half of the income distribution (i.e., the 25th and 

75th percentiles), we estimated income for men approaching retirement 

age using Census’s 2015 Current Population Survey, the most recent 

available.10 Based on this, we used $20,000 annual income for our lowerincome group and $80,000 annual income for the higher-income group, 

using income as a proxy for earnings.

11 The SSA quick calculator 

assumes a prior earnings history based on current earnings covered by 

Social Security, which we did not alter for transparency. Similarly, we 

assumed no future change in earnings. For both individuals, we assumed 

a birthday of 12/1/1953, which makes them 62 years old as of 

12/1/2015.12 Finally, for both individuals, we assumed a retirement date of 

 10We estimated income for men ages 52 to 62 in order to capture multiple years of income 

approaching the early retirement age. 

11Social Security retirement benefits are based on covered earnings from work (such as 

wages and salaries). Earnings from work make up the bulk of income prior to retirement. 

For our purposes, we grouped our scenarios by individual income rather than earnings. 

12Although we assumed a birth year of 1953, we also assumed the life expectancy 

experiences of the 1941 cohort in order to incorporate the life expectancy estimates from 

Waldron’s 2007 study, which examined the 1941 cohort. 

Hypothetical Individuals’ 

Characteristics and 

Analysis
Appendix II: Scenario Calculation Methodology 

and Additional Examples

Page 46 GAO-16-354 Longevity and Retirement

December for a series of years beginning at age 62, the Social Security 

early retirement age.

In order to further understand the effects of life expectancy differences on 

income groups, we compared outcomes with and without taking life 

expectancy differences into account. Specifically, we further calculated 

lifetime benefits using SSA’s actuarially assumed (average) life 

expectancy13 and compared them to the benefits based on the life 

expectancies by lifetime earnings group from Waldron’s 2007 study. We 

describe the difference between these two outcomes as the change in 

benefits due to differential life expectancy.

For simplicity and in order to focus on the effects of life expectancy 

differences in the report, we did not adjust the lifetime Social Security 

benefits for present value.14 Present value calculations reflect the time 

value of money, based on the assumption that a dollar in the future is 

worth less than a dollar today because the dollar today can be invested 

and earn interest. While present value adjustments are an important 

economic tool, we chose instead to report unadjusted figures for several 

reasons: for simplicity; so that average lifetime benefits could be viewed 

as a multiple of current income; and in order to focus on the effects of 

differential life expectancy, including the importance of benefits at older 

ages. It is at these older ages when life expectancy differences predict 

that some income groups will receive, on average, more or fewer years of 

benefits, which is the crux of our analysis. Further, present value 

adjustments were not incorporated by all of the studies we reviewed, and 

one expert we consulted suggested that it would be valuable to show both 

unadjusted and adjusted figures.

However, as a check on our analysis, and in order to provide more 

complete information, we also performed our calculations with 

adjustments for present value. The results of these calculations are 

consistent with our basic finding—that differential life expectancy reduces 

 13We used cohort life tables from SSA based on the intermediate assumptions of the 2015 

Trustees Report. Specifically, we used the life expectancy estimates for the 1941 cohort in 

order to be consistent with the Waldron study. 

14In addition, we did not compare benefits received to taxes paid. For more on payroll 

taxes, see appendix III. 

Lifetime Benefit Figures 

Adjusted for Present Value
Appendix II: Scenario Calculation Methodology 

and Additional Examples

Page 47 GAO-16-354 Longevity and Retirement

the progressivity of projected lifetime Social Security retirement benefits. 

The lifetime benefit figures adjusted for present value are presented 

below. The present value adjustments are based on an assumed real 

(i.e., inflation-adjusted) interest rate of 2.9 percent, which is what SSA 

used as the intermediate long-range assumption for the Social Security 

trust funds in its 2015 Trustees Report.15

Figure 7: Present Value Adjusted Lifetime Social Security Retirement Benefits

for Lower-Income Men

 15The 2015 Annual Report of the Board of Trustees of the Federal Old-Age And Survivors 

Insurance and Federal Disability Insurance Trust Funds (Washington, D.C.: July 22, 

2015).
Appendix II: Scenario Calculation Methodology 

and Additional Examples

Page 48 GAO-16-354 Longevity and Retirement

Figure 8: Present Value Adjusted Lifetime Social Security Retirement Benefits for 

Higher-Income Men
Appendix II: Scenario Calculation Methodology 

and Additional Examples

Page 49 GAO-16-354 Longevity and Retirement

Figure 9: Change in Present Value Adjusted Lifetime Social Security Retirement 

Benefits
Appendix III: Trend in the Cap on Social 

Security Taxable Earnings

Page 50 GAO-16-354 Longevity and Retirement

Workers pay a payroll tax of 6.2 percent of their covered earnings into the 

Social Security trust funds.1 Their employers pay an equal amount, for a 

combined total rate of 12.4 percent.2 This tax only applies to workers’ 

earnings up to an annual limit; for 2016, it is $118,500. This cap is 

technically known as the “contribution and benefit base” because the 

same cap is used to limit the amount of earnings subject to the payroll 

tax, as well as the amount of earnings used in the formula to determine 

benefit levels.

The cap on taxable earnings has changed over time. The maximum 

annual earnings subject to the payroll tax was $3,000 in 1937. However, 

in 1937, 97 percent of all covered workers had total earnings below that 

level. In recent years, about 94 percent have had total earnings below the 

taxable maximum. Meanwhile, the percentage of covered earnings that 

are subject to the payroll tax has fluctuated before generally declining

since the mid-1980s, according to the most recent data available. In 

1983, this figure was more than 90 percent, but it has declined since then 

and, in 2013, about 83 percent of earnings fell below the taxable 

maximum (see fig. 10). This percentage has declined because earnings 

among higher earners (those earning above the maximum) have grown 

faster than earnings among the rest of the working population.3

 1

Covered earnings include wages and salaries, but not earnings on investments. Also, a

portion of the payroll tax is allocated to the Disability Insurance (DI) trust fund and the 

remaining portion is allocated to the Old-Age and Survivors Insurance trust fund. The 

Social Security Benefit Protection and Opportunity Enhancement Act of 2015 increased 

the proportion of these taxes that specifically go to the DI trust fund from 1.8 percent to 

2.37 percent starting in 2016 through the end of 2018. Pub. L. No. 114-74, tit. VIII, 129 

Stat. 584, 601-20.

2

Self-employed workers pay 12.4 percent, but they are allowed an income tax deduction 

for half of the payroll tax. 

3

Kevin Whitman and Dave Shoffner, The Evolution of Social Security’s Taxable Maximum, 

Policy Brief no. 2011-02 (Social Security Administration, September 2011).

Appendix III: Trend in the Cap on Social 

Security Taxable Earnings
Appendix III: Trend in the Cap on Social 

Security Taxable Earnings

Page 51 GAO-16-354 Longevity and Retirement

Figure 10: Percentage of Covered Earnings Subject to the Social Security Payroll 

Tax, 1975-2013

Notes: According to SSA, from 1937 through 1975, the taxable maximum was increased on an adhoc basis and since 1975, the taxable maximum has generally increased at the same rate as average 

wages each year. Data from 2010 and 2011 are preliminary. Taxable earnings from 2012 are 

preliminary estimates based on Social Security data; employment data for that year are preliminary 

estimates based on data from the Bureau of Labor Statistics. Data from 2013 are preliminary 

estimates based on data from the Bureau of Labor Statistics and the Bureau of Economic Analysis.
Appendix IV: Comments from the Social 

Security Administration

Page 52 GAO-16-354 Longevity and Retirement

Appendix IV: Comments from the Social 

Security Administration 
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 53 GAO-16-354 Longevity and Retirement

Charles A. Jeszeck, (202) 512-7215 or jeszeckc@gao.gov

In addition to the contact named above, Margie K. Shields (Assistant 

Director), Margaret Weber (Analyst-in-Charge), Laura Hoffrey, and 

Vincent Lui made key contributions to this report. Also contributing to this 

report were Susan Aschoff, Deborah Bland, Mindy Bowman, Alicia 

Puente Cackley, Sarah Cornetto, John Dicken, Jennifer Gregory, Kathy 

Leslie, Sheila McCoy, Drew Nelson, Mimi Nguyen, Susan Offutt, 

Rhiannon Patterson, Oliver Richard, Max Sawicky, Joseph Silvestri, 

Frank Todisco, and Walter Vance.

Appendix V: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 54 GAO-16-354 Longevity and Retirement

Retirement Security: Better Information on Income Replacement Rates 

Needed to Help Workers Plan for Retirement. GAO-16-242. Washington, 

D.C.: March 1, 2016.

Social Security’s Future: Answers to Key Questions. GAO-16-75SP. 

Washington, D.C.: October 2015.

Retirement Security: Federal Action Could Help State Efforts to Expand 

Private Sector Coverage. GAO-15-556. Washington, D.C.: September 10, 

2015.

Retirement Security: Most Households Approaching Retirement Have 

Low Savings. GAO-15-419. Washington, D. C.: May 12, 2015.

Private Pensions: Participants Need Better Information When Offered 

Lump Sums That Replace Their Lifetime Benefits. GAO-15-74. 

Washington, D.C.: January 27, 2015.

Retirement Security: Challenges for Those Claiming Social Security 

Benefits Early and New Health Coverage Options. GAO-14-311. 

Washington, D.C.: April 23, 2014.

401(K) Plans: Improvements Can Be Made to Better Protect Participants 

in Managed Accounts. GAO-14-310. Washington, D.C.: June 25, 2014.

Retirement Security: Annuities with Guaranteed Lifetime Withdrawals 

Have Both Benefits and Risks, but Regulation Varies across States, 

GAO-13-75. Washington, D.C.: December 10, 2012.

Retirement Security: Women Still Face Challenges. GAO-12-699. 

Washington, D.C.: July 19, 2012.

Unemployed Older Workers: Many Experience Challenges Regaining 

Employment and Face Reduced Retirement Security. GAO-12-445. 

Washington, D.C.: April 25, 2012.

Retirement Income: Ensuring Income throughout Retirement Requires 

Difficult Choices. GAO-11-400. Washington, D.C.: June 7, 2011.

Private Pensions: Some Key Features Lead to an Uneven Distribution of 

Benefits. GAO-11-333. Washington, D.C.: March 30, 2011.

Related GAO Products
Related GAO Products

Page 55 GAO-16-354 Longevity and Retirement

Social Security Reform: Raising the Retirement Ages Would Have 

Implications for Older Workers and SSA Disability Rolls. GAO-11-125. 

Washington, D.C.: November 18, 2010.

Social Security: Options to Protect Benefits for Vulnerable Groups When 

Addressing Program Solvency. GAO-10-101R. Washington, D.C.: 

December 7, 2009.

(131335)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (http://www.gao.gov). Each weekday 

afternoon, GAO posts on its website newly released reports, testimony, 

and correspondence. To have GAO e-mail you a list of newly posted 

products, go to http://www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537.

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube.

Subscribe to our RSS Feeds or E-mail Updates. 

Listen to our Podcasts and read The Watchblog.

Visit GAO on the web at www.gao.gov.

Contact:

Website: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations

Public Affairs

Please Print on Recycled Paper.