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By: FEDweek StaffThe increase in the Social Security “full retirement age,” or FRA, has lowered the percentage of people who begin drawing benefits when they hit that point but far more still take their benefits early, says a report for Congress.
The Congressional Research Service report is the latest of many—including one from CRS itself last year—examining the impact of the phased-in increase ordered during the Social Security reforms of the 1980s and projecting the possible impact of a further increase.
That is one of the options in circulation as the program faces in about 12 years the depletion of the trust fund built up since those earlier reforms, after which income coming in will be sufficient to pay only about 80 percent of projected benefit payouts.
The first phase-in occurred over 2003-2009 and during 2010, 52 percent of new beneficiaries were age 62, the earliest at which benefits can be drawn, and 81 percent drew benefits before hitting their full retirement age, which then was 66. In contrast, in 2021—when the age began increasing by two months per year until it will hit 67—only 55.4 percent drew benefits before reaching their age 66 year.
When the FRA hits age 67 in three years, it added, those drawing benefits at age 62 will receive only 70 percent of their basic amount (called the primary insurance amount, or PIA); that will phase up to 75, 80, 86.7 and 93.3 percent of the PIA for starting at ages 63 through 66. Meanwhile there is an increase per year for delaying receipt after full retirement age up to age 70, meaning that those who begin at 70 will receive 24 percent more than their basic amount.
“The increase in the FRA essentially reduces monthly benefits at all claiming ages, thus reducing the program cost on average. Research also shows that increasing the FRA encourages many people to work longer and delay benefit claiming, thereby increasing payroll tax contributions for the Social Security program and the average claiming age for Social Security benefits,” said the report. “Supporters of increasing the retirement age contend that the average life expectancy is increasing, health conditions of older workers are improving, and job characteristics are more suitable for older workers.”
“Opponents of increasing the retirement age often argue that gains in life expectancy and health status, as well as changes in job characteristics, have not been equally distributed across individuals with different characteristics such as sex, race, educational attainment, or income level. Therefore, some researchers argue that increasing the retirement age may adversely affect Social Security benefits for certain workers, particularly low-wage workers or lower-educated workers,” it said.
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