December 20, 2004
The first baby boomers turn 62 in 2008. At this age, one becomes eligible for early retirement under Social Security and can begin drawing benefits. Historically, benefits at age 62 were 20 percent less than those available at age 65, the full retirement age. To be actuarially fair, these benefits should have been less. As a consequence of the over generousness of early retirement, far too many people took it, says Bruce Bartlett.
- In 1960, when early retirement was introduced, just 10 percent of workers retired at age 62; another eight percent retired before age 65, 35 percent retired at age 65 and 47 percent retired later.
- By contrast, in 2002, 56 percent of workers retired at age 62 and another 23 percent retired before age 65; only 21 percent waited until at least the normal retirement age.
- As a consequence, the average age of retirement has fallen from 66.2 in 1960 to 63.6 in 2002.
Over this same period, life expectancy has risen sharply.
- In 1960, a 65-year-old male could expect to live another 13.2 years and a female could expect 17.4 years.
- By 2003, a man of 65 could expect an additional 16.7 years of life and a woman that age could anticipate 19.5 years.
Thus people have been retiring earlier even as they are living longer.
The trends toward earlier retirement and longer life mean that people are condemning themselves to a lower standard of living in old age than they would have if they had waited a couple of years to begin drawing Social Security benefits. Some people may not even realize the lower benefits they get at age 62 last a lifetime. They may be under the erroneous belief that their benefits will be bumped up at age 65. They won't, says Bartlett.
Source: Bruce Bartlett, "Early Retirees," National Center for Policy Analysis, December 20, 2004.
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