Social Security Retirement Age and Fixing the System

The Congressional Research Service (CRS) has updated its report on the Social Security retirement age. The report provides a discussion of some current trends concerning and affecting that threshold and how the Social Security retirement age may relate to addressing the challenges facing the Social Security system. 

The full retirement age (FRA) – the age at which workers can first claim full Social Security retired-worker benefits – is an important gauge for a variety of reasons, the CRS says, including these: 

• A worker’s monthly benefit amount is affected by the age at which he or she claims benefits relative to the FRA. 
• Benefit adjustments, which are intended to provide the worker with roughly the same total lifetime benefits regardless of when he or she claims benefits based on average life expectancy, are made based on the number of months before or after the FRA the worker claims benefits. 
• Claiming benefits before the FRA results in a permanent reduction in monthly benefits (to take into account the longer expected period of benefit receipt).
• Claiming benefits after the FRA results in a permanent increase in monthly benefits (to take into account the shorter expected period of benefit receipt). 

Early Benefits Claims

Workers and spouses can claim reduced retirement benefits as early as age 62 (the early eligibility age); other dependents, such as widow(er)s, can claim benefits at earlier ages. For workers with an FRA of 66, for example, claiming benefits at age 62 results in a 25% reduction in monthly benefits. For workers with an FRA of 67, claiming benefits at age 62 results in a 30% benefit reduction. 

Claiming Social Security benefits before FRA is widespread, according to the CRS, which reports that a majority of retired-worker beneficiaries claim benefits before the FRA. In 2017, the report says, 37% of new retired-worker beneficiaries were age 62, and 64% were younger than 66. 

Delayed Benefits Claims

Workers who delay claiming benefits until after the FRA receive a delayed retirement credit, which applies up to the age of 70. For workers with an FRA of 66, for example, claiming benefits at age 70 results in a 32% increase in monthly benefits. For workers with an FRA of 67, claiming benefits at age 70 increases benefits by 24%.

Claiming Social Security benefits later than FRA is not nearly as widespread, the CRS says. In 2017, it reports, 23% of new retired-worker beneficiaries were age 66; 12% were older than that.

FRA Trends

Currently, the FRA is 66 and 6 months for workers who become eligible for retirement benefits in 2019 (i.e., workers born in 1957). 

The FRA was 65 when the Social Security system was born in the 1930s. Roughly half a century later in 1983, a Social Security reform measure was enacted that included a provision gradually increasing the FRA from age 65 to 67 over a 22-year period (for those reaching age 62 between 2000 and 2022). The FRA will reach 67 for workers born in 1960 or later (i.e., for workers who become eligible for retirement benefits at age 62 in 2022). 

Changing the FRA

The CRS notes that Social Security faces serious challenges, among them long-term financial pressures. “The Social Security system once again faces projected long-range funding shortfalls. The Social Security Board of Trustees (the Trustees) projects that full Social Security benefits can be paid on time until 2034 with a combination of annual Social Security tax revenues and asset reserves held by the Social Security trust funds. After the projected depletion of trust fund reserves in 2034, however, annual tax revenues are projected to cover about three-fourths of benefits scheduled under current law,” the report says. 

Another major challenge is that posed by increasing life expectancy. The report notes that life expectancy matters because the actuarial adjustments for claiming benefits before or after the full retirement age are based on average life expectancy.

“Over the years,” the CRS says, “many proposals have been designed to improve Social Security’s financial outlook as well as achieve other policy goals.” It notes that a common answer to these challenges is to increase the early eligibility age or further increase the full retirement age. But it also observes that such sentiment is not universal and that “concerns regarding the effects of increasing the retirement age, especially on certain segments of the population, are not new.”

While some lawmakers have called for increasing the Social Security retirement age, others express concern that increasing the FRA would disproportionately affect certain groups, since life expectancy is not uniform and varies by socioeconomic group. And the CRS adds that there are additional concerns about increasing the FRA, since some workers – such as those who work in physically demanding occupations – may not be able to work longer and may not qualify for Social Security disability benefits. “Research has shown that differential gains in life expectancy have resulted in a widening gap in the value of lifetime Social Security retirement benefits between low earners and high earners,” the report says.