Raise the Earliest Eligibility Age for Social Security

Although the full retirement age for Social Security beneficiaries is now 66 and will rise to 67 for people born in 1960 and later, eligible workers may choose to receive benefits at age 62. About 40 percent do so, and nearly all claim benefits by 66. The age at which people claim benefits affects the amount they receive monthly and the duration of their benefits. People who claim benefits before the full retirement age receive less each month, but typically they receive benefits for a longer period; conversely, people who wait to claim benefits until they are older (up to age 70) receive higher monthly payments but for fewer years. The adjustment for the age of claiming benefits is currently actuarially fair, on average, so a person's total lifetime benefits have an approximately equal value regardless of the age at which he or she begins to collect them.

This option would increase the earliest age of eligibility by two months per year, beginning with people born in 1950 (who turn 62 in 2012); by 2025, the age would be 64 for people born in 1961 and later. The result is that federal outlays would be reduced by about $33 billion over five years and by nearly $144 billion through 2021.

Because this option would have little effect on lifetime benefits for the average beneficiary, its main budgetary effect would be a shift in the timing of outlays, which would be slightly lower than under current law from 2012 to about 2035 and would be slightly higher thereafter. There are three complicating factors, however. First, a higher earliest eligibility age would induce some people to work longer, increasing the size of the workforce and boosting federal revenues from income and payroll taxes. Second, the additional work would result in higher future Social Security benefits, although the increase in benefits would be smaller than the increase in revenues. The 10-year estimates for this option do not include those two effects. Third, changing the earliest eligibility age would have a small effect on the number of people who applied and qualified for Social Security disability insurance as well as on the timing of applications for disability benefits. The estimates take that effect into account; however, it does not significantly change the projected savings.

An argument in favor of the option is that the older population is becoming healthier and able to work longer and therefore many people do not need benefits at as early an age as workers did in the past. The change also would increase annual benefits for some beneficiaries, reducing poverty among older people. Under current law, the penalty for claiming benefits early is increasing as the full retirement age rises. For example, people born before 1938 who claimed benefits at age 62 received 80 percent of the full benefit (the amount that they would have received had they waited until the full retirement age). That fraction is decreasing under current law, to 70 percent for people born after 1959 who claim benefits at 62. If the earliest age of eligibility was 64, all retirees would receive at least 80 percent of their full monthly benefit.

An argument against the option is that it would increase financial hardship for some people who do not qualify for Social Security disability benefits and would have to wait until age 64 to claim retirement benefits. In addition, forcing people with lower-than-average life expectancies to delay claiming benefits would reduce their lifetime benefits. For example, someone who died at 68 would collect benefits for four years rather than six. And because people with lower earnings tend to have shorter life expectancies, they would be more likely to be harmed by the change.