How Would Indexing for Improvements in Life Expectancy Affect Trust Fund Balances?

Brief

How Would Indexing for Improvements in Life Expectancy Affect Trust Fund Balances?

Abstract

Adjusting Social Security retirement ages as people live longer would significantly improve trust fund balances over the long run, though it would have only modest effects in the short term. By the 75th year, Social Security actuaries project that raising the retirement age by indexing it to life expectancy would reduce annual deficits by one-third to one-half, depending on the adjustment, and improve actuarial balances by one-fifth to two-fifths. These estimates may understate revenue gains from additional work. At any given tax rate, these adjustments would increase average annual benefits and, due to additional revenues, lifetime benefits, while concentrating benefits more in older ages.

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