Full/Normal Retirement Age and Early Retirement Eligibility

Background

Raising the age at which people receive full retirement benefits (the Full Retirement Age or FRA) has been offered as an option to address the Social Security system’s long-term funding shortfall, because it would cut benefits for all but beneficiaries with disabilities. The FRA is currently 66 and will begin to increase steadily beginning with people born in 1955. It is scheduled to reach 67 for workers born in 1960 or later due to the 1983 Social Security Act amendments.

Further FRA changes have been proposed. They include accelerating the timetable for the age increase, raising the FRA to 70, and indexing it to longevity. Supporters of FRA increases point to increasing longevity as justification. They believe that the scheduled increase to 67 is an inadequate response to longer life expectancies. Social Security actuaries project that life expectancy for those reaching age 65 will increase by 5.7 years for men and 4.4 years for women between 2000 and 2090.

Those opposed to FRA increases state that increasing the retirement age would disproportionately hurt African-American men who have below-average life expectancies, and people in physically demanding jobs who would find it difficult to delay retirement. Also, women who depend on their spouses’ Social Security benefit, particularly as survivors late in life, would be hurt if their husbands were to retire early and receive a greater benefit cut due to the FRA increase. Of equal concern are age discrimination and the likelihood of suitable jobs being available for workers in their late 60s.

The increase in the FRA created a disincentive to receiving benefits at the earliest retirement age (62). Many workers choose to begin taking benefits between age 62 and 65. Under the previous law the penalty for retiring at age 62 was a 20 percent reduction in the benefit that would have been received at age 65.

Some proposals suggest increasing the FRA while keeping the earliest eligibility age (EEA) the same (62). When the increase in the FRA reaches age 67, a worker retiring at age 62 will experience a 30 percent reduction from the full monthly benefit rather than the former 20 percent reduction. Some have proposed gradually raising the EEA to 65. This would have little direct effect on Social Security solvency, but could encourage some people to work longer. Regardless of whether a person works longer or not, raising EEA would increase the benefits many people receive when they retire. However, some individuals in arduous occupations (who may be more reliant on Social Security benefits than those in other occupations) find that working past age 62 is not feasible because of health and/or employment options (for a further discussion of older people seeking work, see Chapter 5, Employment).

Full/Normal Retirement Age and Early Retirement Eligibility: Policy

Changes to full retirement age

In this policy: Federal

Any further increases in the normal retirement age should be conditioned on adequate protections for those who may have difficulty postponing retirement. This group includes lower-income workers who also often have below-average life expectancies, workers who are in ill health, workers in jobs with strenuous or difficult working conditions, workers with caregiving responsibilities, and older workers facing age discrimination and long-term unemployment.

Early retirement

In this policy: Federal

The age of eligibility for early retirement benefits should be raised only if provisions are made to ensure that benefits for people who cannot work past age 62 are protected.