Social Security Retirement Age Not What You Think

The effective retirement age for Social Security is now 70, according to a new research brief from the Center for Retirement Research at Boston College.

“Social Security’s Real Retirement Age Is 70” by Alicia H. Munnell says this age change is the result of increases in Social Security’s Delayed Retirement Credit, with monthly benefits reduced for earlier claiming. According to Munnell, “That credit, which was modest at first, now fully compensates for delayed claiming. As a result, lifetime benefits are roughly equal for any claiming age between 62 and 70, and the highest monthly benefits are available at 70. So in that regard, 70 has become the new 65.”

She added, “The level of monthly benefits at 70 appears appropriate given the increased deductions for Medicare premiums, the greater taxation of benefits, the declining importance of the spouses’ benefit, and the diminished sources of other retirement income. The brief aims to clarify Social Security’s current benefit structure.”

In the brief, Munnell examines: how 70 became Social Security’s new retirement age; whether 70 is the “right” age by looking at “equivalency” to 65, the increasing dispersion in life expectancy by socioeconomic status, and actual retirement patterns; Social Security replacement rates that workers will face at different retirement ages; how with the maturation of the Delayed Retirement Credit, the “Full Retirement Age” no longer describes the benefit structure, and how further increases in this benchmark simply reduce replacement rates for everyone.

The brief also suggests:

  • Benefit levels at age 70 appear appropriate given that rising deductions for Medicare and greater benefit taxation have reduced Social Security’s net replacement rates;
  • The shift to age 70 should be feasible for many workers given increases in lifespans, health and education;
  • Vulnerable workers forced to claim early will have low benefits and will be particularly harmed by any further cuts; and
  • Policymakers need to inform those who can work that 70 is the new retirement age and devise ways to protect those who cannot work.

Munnell concludes, “People are living much longer, so keeping monthly [Social Security] benefit levels unchanged results in ever increasing costs. But constantly reducing benefit levels by increasing the Full Retirement Age is very hard on those who cannot change their retirement date. If we want to cut benefits, it makes much more sense to directly change the benefit formula.”

The full brief can be downloaded here.