NCPA - National Center for Policy Analysis

Workers Retire Early With Lower Social Security Benefits

February 17, 1999

Although 65 is still commonly considered the ordinary retirement age, most people in the United States actually stop working before then -- even though it means lower Social Security benefits -- according to a Congressional Budget Office study.

  • At age 55, five out of six men were in the labor force in 1997; at age 62, only half were; and at age 65, the labor force participation rate was down to one-third.
  • Likewise, although two-thirds of women were in the labor force at age 55, only 40 percent were at age 62.
  • By contrast, in 1950 nearly half of all men 65 or older were still in the labor force, compared with only one in six today.

The story is more complicated for women. In 1950, only about 40 percent of women in their 30s and 40s, and even fewer older women, were in the labor force. Since then, their participation rates at all ages have increased. But as with men, participation drops sharply well before age 65.

During the past decade more than two-thirds of the workers who began receiving Social Security retirement benefits chose to accept a reduced monthly check in order to begin collecting benefits before age 65 -- the majority of them at age 62, the earliest eligibility age. Thus Social Security plays an important role in decisions about when to withdraw from the labor force. The majority of the workers who take early Social Security benefits receive other pensions and many of them stop working before their Social Security benefits begin.

Thus the decision to stop working appears to be linked to financial incentives, rather than inability to work due to health: fewer than one in 10 of the men who claimed Social Security retirement benefits at age 62 in 1993 or 1994 were both in poor health and in a household with no income from pensions, concluded a study by Burkhauser, Couch and Phillips.

Source: Ralph Smith, et al., "Raising the Earliest Eligibility Age for Social Security Benefits," January 1999, Congressional Budget Office, Washington, D.C.


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