NCPA - National Center for Policy Analysis


February 24, 2005

Increasing the normal retirement age and discouraging early retirement are two ways to reduce traditional, government-funded Social Security benefits. Combined with proposed personal retirement accounts, these measures could close the program's long-term debt while providing benefits that approximate what the current system promises, says Matt Moore, a senior policy analyst with the National Center for Policy Analysis.

The drive to raise the retirement age is understandable, says Moore:

  • When the Social Security program was implemented in the 1940s, life expectancy at birth was only 61.4 years for men and 65.7 for women; since the normal retirement age was 65 years, most workers died before qualifying for benefits.
  • Today, thanks in part to healthier lifestyles and the advancements of modern medicine, men are expected to live to age 74; women to age 79.
  • By mid-century, men are projected to live to 79; women to age 83.

While the normal retirement age is currently 65 years 2 months and rising, workers can still opt for "early retirement" at age 62. Today, almost 70 percent of workers retire early! Of course, early retirement leads to permanently reduced benefits; for example:

  • A worker who retires at age 62 would receive monthly benefits 20 percent lower than if the worker had reached normal retirement age.
  • By contrast, workers who wait to apply for benefits until after the normal retirement age receive a permanent bonus.
  • Even so, encouraging people to work longer will reduce the number of years they collect benefits and reduce total benefits paid over time.

Regardless of which method Congress eventually adopts, today's younger workers and future generations face additional burdens. Adding a personal retirement account to any of the options outlined above will give younger workers a way to make up their losses, says Moore.

Source: Matt Moore, "Social Security Reform: Looking at the Options," Brief Analysis No. 504, National Center for Policy Analysis, February 24, 2005.

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