Social Security faces a long-term financing problem. The program now spends more than it collects each year, and Social Security’s trustees project that it will be unable to pay full benefits beginning in 2034. Reducing the payment period by raising the age at which beneficiaries can begin collecting benefits would improve Social Security’s finances. But some older people, especially those with limited education and incomes, could suffer financially if they had to wait longer to collect retirement benefits.
This report examines how raising Social Security’s early entitlement age (EEA), currently 62, might affect beneficiaries and discusses ways to protect adults who might not be able to work until qualifying for Social Security benefits.
Reasons for and against raising the retirement age
Since the EEA was introduced in 1956 for women and 1961 for men, life expectancy at age 62 has increased about five years, and it is projected to rise another three years by 2050. If policymakers raised the EEA to 65, Social Security beneficiaries who collected at that age in 2050 would spend about as many years in retirement as those who retire today at the current EEA and would spend four or five more years in retirement (depending on their sex) than those who retired at age 62 in 1960. Raising Social Security’s EEA in tandem with the full retirement age could reduce program costs.
Despite increased life expectancy, there is little evidence that work ability for people in their early and midsixties has improved over the past two decades. Declines in disability rates have stalled and may have reversed. Slightly more than one-third of nondisabled workers in their early fifties develop a health-related work limitation by age 65. Physically demanding jobs remain commonplace, even for older workers. And many older workers face a hostile labor market.
Delaying retirement is especially uncertain for older people with limited education. People working longer and retiring later are disproportionately college graduates. Few people with limited education, who are more likely than their better-educated counterparts to suffer from health problems and work in physically demanding jobs, have extended their careers. Because people with health problems often fall through the disability safety net, early Social Security retirement benefits pull many older people with health problems out of poverty, especially those with limited education.
Possible Options to Protect Vulnerable Older Adults
Raising the EEA without making other policy changes to protect people who cannot work until they qualify for retirement benefits could create significant economic hardship. Additional policy reforms could mitigate the financial impact of raising the EEA for some retirees, but it seems unlikely they could protect all vulnerable older adults.
More thoroughly evaluating the health status of older adults with potential disabilities and providing cash benefits in a timely manner to everyone who cannot work—and only to those who cannot work—is a laudable goal but difficult and expensive to implement. A more realistic approach is to grant special benefits to certain groups, such as those in hazardous or arduous occupations. But these groups would likely include many people who can work and exclude many who cannot work, so targeting benefits to them would not be an efficient use of scarce public resources.
Modest reforms that could ease the transition to a higher EEA may be warranted. For example, reducing the Supplemental Security Income (SSI) eligibility age from 65 to 62 for nondisabled, low-income adults with few resources would provide a safety net for those who lose access to Social Security retirement benefits at age 62. Modernizing SSI by instituting a more realistic resource test and improving benefits could provide meaningful protection. Expanding government employment and training services could improve employment prospects for older adults. Policymakers should also consider reforming Social Security Disability Insurance to encourage employers to better accommodate workers with disabilities and promote their rehabilitation. It may be time to consider providing partial disability benefits to workers who are not completely disabled.
Policymakers could also reform other aspects of Social Security to make the retirement program more progressive and offset some of the financial losses that increasing the EEA would impose on low-income retirees. Such changes as creating a meaningful minimum benefit or raising the share of lifetime earnings that Social Security benefits replace for lower-income beneficiaries could maintain the lifetime value of their retirement benefits.