Retirement & Financial Planning Report

Raising the age at which Social Security pays its standard benefit is again being mentioned as a way to address that system’s financial problems but doing so would raise a number of issues, including the potential for increasing outlays in some ways, a Congressional Research Service report has said.

The report notes that the system currently is within a few years of finalizing an increase that was enacted in 1983 of what is called the “full” retirement age. That traditionally was age 65, but was phased up to age 66 over six years starting in 2000, where it remained level until the second phase started this year. It is now 66 and two months and will continue phasing up to 67 in 2027.

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Meanwhile the earliest age at which benefits can be drawn remains 62, but as the standard age increases, so does the reduction for taking benefits before that age. Benefits meanwhile are increased for waiting past full retirement age, up to starting at age 70 where there is no further increase.

The CRS noted proposals to again raise the standard age, possibly to 69, “in response to the system’s projected financial imbalance, citing gains in life expectancy for the population overall.” It noted projections showing two years of additional average life expectancy from age 65 on over roughly 2000-2030 with an additional two years projected over 2030-2050. That’s despite the general flattening across the entire population in life expectancy gains during recent years, it added.

However, the CRS added that “gains in life expectancy have not been shared equally across different segments of the population. Opponents cite research showing that life expectancy is lower for individuals with lower socioeconomic status (i.e., less education and lower earnings) and that the gap in life expectancy by socioeconomic status has been growing over time.”

People in those demographic groups further are more likely to be employed in more physically demanding occupations, it added, which are correlated to lower ability to continue to working at more advanced ages. The result, it said, could be an increase in Social Security disability claims, increasing the cost of that aspect of the program.

Raising the full retirement age while leaving the earliest allowable age at 62 would mean that those who need to begin drawing benefits at younger ages would be living on still less, it added.

For example, it said, through last year when the full retirement age was 66, the benefit reduction for beginning at age 62 was 25 percent, and when the full age hits 67 in 2027, the reduction for starting at 62 will be 30 percent, and raising the full age to 69 would mean a 40 percent reduction if starting at 62.

Raising the earliest age along with the standard age would keep the reduction from rising as well but “it would also create challenges for workers between the ages of 62 and the new [minimum age] who have health or employment circumstances that limit their ability to work at or past age 62,” it said.

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