Should We Raise Social Security's Earliest Eligibility Age?

Abstract

Social Security's Earliest Eligibility Age (EEA) allows one to claim reduced benefits as early as age 62. For full benefits, individuals must wait until the Normal Retirement Age (NRA), which was traditionally 65 but is gradually increasing to 67. So, Americans have a choice to make when they reach their early 60s: claim a reduced Social Security benefit right away or delay until some further date and receive a larger benefit. The reduction for claiming benefits early is designed to be actuarially fair, i.e. monthly benefits are lowered by an amount that offsets the longer period for which they will be received. The total amount that the average person can expect to receive over his or her lifetime thus does not depend on when benefits are claimed.

In recent years some have suggested raising the EEA. Proponents say that such a move could make Social Security a more adequate source of income later in life by preventing people from taking benefits so early that their monthly check is too low. In addition, they say, raising the EEA may encourage people to work longer. Increasing labor force participation among those in their early sixties is possibly the best solution to guaranteeing a more financially secure retirement.

Not everyone is so convinced, though. Opponents claim that many individuals can neither work longer nor save more for retirement. Raising the EEA could impoverish these groups as well as strain social programs like Disability Income (DI) and Supplemental Security Income (SSI) that would likely end up serving more people. Finally, they contend that withholding benefits until a later age hurts those with shorter life expectancies, and shifts more retirement wealth to those with longer lives.

Despite these negatives, raising the EEA may well be desirable policy. But it is a hard sell politically. It does nothing to eliminate Social Security's long-term financing gap and would probably require greater current outlays on DI and SSI. The best that could be said on the financing side is that it may pave the way for future increases in the Normal Retirement Age, which does improve solvency. Raising the EEA thus is probably a realistic option only as part of a package of other changes that restore financial balance and maintain equity in the Social Security program.

Keywords: social security, eligibility, eea

JEL Classification: H55, J26