NCPA - National Center for Policy Analysis

Social Security Credit For Delayed Retirement To Increase

November 1, 1999

To encourage workers to stay in the labor force, the delayed retirement credit raises benefits for those of retirement age who put off drawing Social Security benefits. For workers turning 65 this year, they will receive a 5.5 percent increase in their Social Security benefits for each year they delay drawing benefits.

Many workers are under the mistaken belief that any benefits they fail to draw simply are lost. But a new study from the National Bureau of Economic Research says most workers would be better off by delaying their first Social Security benefit check by up to 3 years.

The delayed retirement credit will rise to 8 percent in 2008 (for workers born in 1943). This means that someone waiting until age 70 before drawing benefits would get 40 percent more than if they started at age 65. (After age 70 there is no further increase in benefits.) At that point, Social Security actuaries estimate the lifetime benefits people receive will be the same in the aggregate regardless of whether they retire at age 65 or age 70.

The delayed retirement credit is important because the nation is facing a critical shortage of skilled workers.

  • In 1948, 46.8 percent of men age 65 were still in the labor force (working or looking for work).
  • Last year, that figure was down to just 16.5 percent.
  • At the same time, the average age at which workers begin drawing Social Security benefits has fallen from 70 in 1945 to 63.6 in 1995.

Indeed, a majority of workers now choose early retirement at age 62, even though their benefits are sharply lower. In 1960, just 10 percent of workers chose early retirement; in 1995, 58.3 percent did.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, October 27, 1999.


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