The Social Security Retirement Age
Released: 2019-03-07T00:00:00

Introduction

The Social Security full retirement age (FRA) is the age at which workers can first claim full Social Security retired-worker benefits. Among other factors, the age at which an individual begins receiving Social Security benefits has an impact on the size of the monthly benefits. Claiming benefits before the FRA can substantially reduce monthly benefits, whereas claiming benefits after the FRA can lead to a substantial increase in monthly benefits. Benefit adjustments are made based on the number of months before or after the FRA the worker claims benefits. The adjustments are intended to result in roughly the same total lifetime benefits, regardless of when the worker claims benefits, based on average life expectancy.

The FRA was 65 at the inception of Social Security in the 1930s. As part of legislation enacted in 1983, the FRA is increasing gradually from 65 to 67 over a 22-year period that started for those who turned age 62 in 2000. The increase in the FRA will be fully phased in (the FRA will reach 67) for workers born in 1960 or later (i.e., for workers who become eligible for retirement benefits at age 62 in 2022). For workers who become eligible for retirement benefits in 2019 (i.e., workers born in 1957), the FRA is 66 and 6 months.

Workers can claim Social Security retired-worker benefits as early as age 62, the early eligibility age (EEA). However, workers who claim benefits before the FRA are subject to a permanent reduction in their benefits. Spouses can also claim reduced retirement benefits as early as age 62. Other types of dependents can claim benefits before the age of 62.

Workers who claim benefits after the FRA receive a delayed retirement credit that results in a permanent increase in their monthly benefits. The credit applies up to the age of 70. Claiming benefits after attainment of age 70 does not result in any further increase in monthly benefits.

Full Retirement Age

The FRA was 65 at the inception of Social Security. According to Robert Myers, who worked on the creation of the Social Security program in 1934 and later served in various senior and appointed capacities at the Social Security Administration (SSA), "[a]ge 65 was picked because 60 was too young and 70 was too old. So we split the difference." On the other hand, SSA suggests that the Committee on Economic Security (CES) made the proposal of 65 as the retirement age due to the prevalence of private and state pension systems using 65 as the retirement age and the favorable actuarial outcomes for 65 as the retirement age.

In 1983, Congress increased the FRA as part of the Social Security Amendments of 1983, which made major changes to Social Security's financing and benefit structure to address the system's financial imbalance at the time. Among other changes, the FRA was increased gradually from 65 to 67 for workers born in 1938 or later. Under the scheduled increases enacted in 1983, the FRA increases to 65 and 2 months for workers born in 1938. The FRA continues to increase by two months every birth year until the FRA reaches 66 for workers born in 1943 to 1954. Starting with workers born in 1955, the FRA increases again in two-month increments until the FRA reaches 67 for workers born in 1960 or later. The increase in the FRA, one of many provisions in the 1983 amendments designed to improve the system's financial outlook, was based on the rationale that it would reflect increases in longevity and improvements in the health status of workers. The 1983 amendments did not change the early eligibility age of 62 (discussed below); however, the increase in the FRA results in larger benefit reductions for workers who claim benefits between the age of 62 and the FRA. Table 1 shows the FRA by worker's year of birth under current law.

Early Eligibility Age

Currently, the EEA is 62 for workers and spouses; this is the earliest age at which they can claim retirement benefits. Benefits claimed between age 62 and the FRA, however, are subject to a permanent reduction for "early retirement." When the original Social Security Act was enacted in 1935, the earliest age to receive retirement benefits was the FRA (age 65). In 1956, the eligibility age was lowered from 65 to 62 for female workers, wives, widows, and female dependent parents. This was to allow wives, who traditionally were younger than their husbands, to qualify for benefits at the same time as their husbands. Benefits for female workers and wives were subject to reduction if claimed between the ages of 62 and 65; the reduction did not apply to benefits for widows and female dependent parents.

In 1961, the eligibility age was lowered from 65 to 62 for men as well. Benefits for male workers and husbands were subject to reduction if claimed between the ages of 62 and 65; the reduction did not apply to widowers and male dependent parents. Although the eligibility age was made consistent for male and female workers, an inconsistency remained in the calculation of benefits. A man the same age as a woman needed more Social Security credits to qualify for benefits, and, if his earnings were identical to hers, usually received a lower benefit because his earnings were averaged over a longer period. This inconsistency was addressed in legislation enacted in 1972 which provided that retirement benefits would be computed the same way for men and women (the provision was fully effective for men reaching age 62 in 1975 or later).

In subsequent years, further adjustments were made to the eligibility age for surviving spouses. The eligibility age was lowered to age 60 for widows (1965), age 50 for disabled widow(er)s (1967), and age 60 for widowers (1972).

Actuarial Modification to Benefits: Claiming Before or After the FRA

Benefits are adjusted based on the age at which a person claims benefits to provide roughly the same total lifetime benefits regardless of when a person begins receiving benefits, based on average life expectancy. The earlier a worker begins receiving benefits (before the FRA), the lower the monthly benefit will be, to offset the longer expected period of benefit receipt. Conversely, the longer a worker delays claiming benefits (past the FRA), the higher the monthly benefit will be, to take into account the shorter expected period of benefit receipt. The benefit adjustment is based on the number of months between the month the worker attains the FRA and the month he or she claims benefits. The day of birth is ignored for adjustment purposes, except for those born on the first of the month. Workers born on the first of the month base their FRA as if their birthday was in the previous month (e.g., someone born on February 1, 1980, who has an FRA of 67, can apply for full retirement benefits in January 2047). A calculator on SSA's website allows the user to enter his or her date of birth and the expected month of initial benefit receipt to see the effect of early or delayed retirement; the effect is shown as a percentage of the full benefit payable at the FRA.

Actuarial Reduction for Claiming Benefits Before the FRA

When a worker claims benefits before the FRA, there is an actuarial reduction in monthly benefits. The reduction for claiming benefits before the FRA can be sizable and it is permanent; all future monthly benefits are payable at the actuarially reduced amount. For each of the 36 months immediately preceding the FRA, the monthly rate of reduction from the full retirement benefit is five-ninths of 1%. This equals a 6⅔% reduction each year. For each month earlier than three years (36 months) before the FRA, the monthly rate of reduction is five-twelfths of 1%. This equals a 5% reduction each year. The earliest a worker can claim retirement benefits is age 62. For a worker with an FRA of 67, claiming benefits at 62 results in a 30% reduction in their monthly benefit. Table 2 shows the actuarial reduction applied to retired-worker benefits based on the FRA and the age at which benefits are claimed.

Delayed Retirement Credit for Claiming Benefits After the FRA

Workers who claim benefits after the FRA receive a delayed retirement credit (DRC). As with the actuarial reduction for early retirement, the delayed retirement credit is permanent. The DRC has been modified over the years. Initially, the Social Security Amendments of 1972 provided a delayed retirement credit that increased benefits by one-twelfth of 1% for each month between ages 65 and 72 that a worker did not claim benefits (i.e., 1% per year). The credit, which was effective after 1970, applied only to the worker's benefit; it did not apply to a widow(er)'s benefit payable on the worker's record. The Social Security Amendments of 1977 increased the credit to 3% per year and included the credit in the computation of a widow(er)'s benefit.

The credit was further increased under the Social Security Amendments of 1983. As shown in Table 3 , under current law, the amount of the credit varies based on the worker's year of birth (i.e., when the worker becomes eligible for benefits at age 62). The credit increases gradually until it reaches 8% per year (two-thirds of 1% per month) for workers born in 1943 or later (i.e., workers who became eligible for retirement benefits in 2005 or later). In addition, the maximum age at which the DRC applies was lowered from 72 to 70. Any further delay in claiming benefits past age 70 does not result in a higher benefit. The increase in the DRC was intended to ensure that workers who claim benefits after the FRA receive roughly the same total lifetime benefits as if they had claimed benefits earlier (based on average life expectancy). A worker with an FRA of 66, for example, receives a 32% benefit increase if he or she claims benefits at age 70; a worker with an FRA of 67 receives a 24% benefit increase.

Figure 1 illustrates the effect of claiming age on benefit levels based on an FRA of 66. If the worker claims retirement benefits at age 62, for example, his or her benefit would be equal to 75% of the full benefit amount—a 25% permanent reduction based on claiming retirement benefits four years before attaining the FRA. If the worker delays claiming retirement benefits until age 70, however, his or her benefit would be equal to 132% of the full benefit amount—a 32% permanent increase for claiming benefits four years after the FRA.

Retirement Earnings Test

The decision to claim Social Security benefits before the FRA results in a permanent reduction in monthly benefits for early retirement. In addition, if a Social Security beneficiary is below the FRA and has current earnings, he or she is subject to the retirement earnings test (RET). Stated generally, Social Security benefits are withheld partially or fully, for one or more months, if current earnings exceed specified thresholds.

There are two separate earnings thresholds (or exempt amounts ) under the RET. The first (lower) threshold applies to beneficiaries who are below the FRA and w ill not attain the FRA during the year. In 2019, the lower earnings threshold is $17,640. If a beneficiary has earnings that exceed the lower threshold, SSA withholds $1 of benefits for every $2 of earnings above the threshold.

The second (higher) threshold applies to beneficiaries who are below the FRA and will attain the FRA during the year. In 2019, the higher earnings threshold is $46,920. If a beneficiary has earnings that exceed the higher threshold, SSA withholds $1 of benefits for every $3 of earnings above the threshold. The RET no longer applies beginning with the month the beneficiary attains the FRA. In other words, once the beneficiary attains the FRA, his or her benefits are no longer subject to withholding based on earnings.

During the first year of benefit receipt, a special monthly earnings test applies. Regardless of the amount of annual earnings in the first year of benefit receipt, benefits are not withheld for any month in which earnings do not exceed a monthly exempt amount (the monthly exempt amount is equal to 1/12 of the annual exempt amount). In 2019, the monthly exempt amounts are $1,470 ($17,640/12) and $3,910 ($46,920/12).

For example, consider a worker who claims benefits at age 62 in January 2019 and has no earnings during the year except for a consulting project that pays $20,000 in July. Although the beneficiary's annual earnings ($20,000) exceed the annual exempt amount ($17,640), benefits are withheld only for the month of July. The beneficiary has $0 earnings in all other months; July is the only month in which earnings exceed the monthly exempt amount ($1,470).

Benefits withheld under the RET are not "lost" on a permanent basis. When a beneficiary attains the FRA and is no longer subject to the RET, SSA automatically recalculates the benefit, taking into account any months for which benefits were partially or fully withheld under the RET. Stated generally, there is no actuarial reduction for early retirement for any month in which benefits were partially or fully withheld under the RET. The recalculation results in a higher monthly benefit going forward. Starting at the FRA, the beneficiary begins to recoup the value of benefits withheld under the RET; the beneficiary recoups the full value of those benefits if he or she lives to average life expectancy.

Age Distribution of New Retired-Worker Beneficiaries

Statistics published by SSA show that a majority of retired-worker beneficiaries claim benefits before the FRA. Figure 2 shows the age distribution of new retired-worker beneficiaries in 2017. Among nearly 2.5 million new retired-worker beneficiaries that year, 37% claimed benefits at age 62 (the first year of eligibility) and 64% were under the age of 66. About one-fourth (23%) of new retired-worker beneficiaries claimed benefits at age 66, while 12% were age 67 or older. The percentage of retired-worker beneficiaries who claim benefits at earlier ages has declined in recent years. In 2010, for example, more than one-half (52%) of new retired-worker beneficiaries were age 62 and 81% were under the age of 66.

Proposals to Increase the Retirement Age

The Social Security full retirement age was 65 when the program was established in the 1930s. It remained 65 until 1983, when Congress included an increase in the FRA among many provisions in the Social Security Amendments of 1983, which were designed to address serious near-term and long-range financing problems. The 1983 Amendments became law on April 20, 1983 . Without legislative action, it was anticipated that Social Security benefits could not be paid on time beginning in July 1983 . The 1983 provision that increased the FRA from 65 to 67 continues to be phased in; it will be fully phased in by 2022.

The Social Security system once again faces projected long-range funding shortfalls. The Social Security Board of Trustees (the Trustees) projects that full Social Security benefits can be paid on time until 2034 with a combination of annual Social Security tax revenues and asset reserves held by the Social Security trust funds. After the projected depletion of trust fund reserves in 2034, however, annual tax revenues are projected to cover about three-fourths of benefits scheduled under current law.

Over the years, many proposals have been designed to improve Social Security's financial outlook as well as achieve other policy goals. A common proposal is to increase the early eligibility age or further increase the full retirement age. As in the past, lawmakers who support increasing the retirement age point to gains in average life expectancy as an indicator that people can work until older ages. Those who oppose this type of policy change, however, point out that gains in life expectancy have not been shared equally across different segments of the population. They cite research showing that life expectancy is lower for individuals with lower socioeconomic status (SES) compared to those with higher SES, and that the gap in life expectancy by SES has been growing over time.

Differential gains in life expectancy are important in the context of Social Security. The actuarial adjustments to benefits for early or delayed retirement (i.e., for claiming benefits before or after the FRA) are based on average life expectancy. That is, the actuarial adjustments are designed to provide a person with roughly the same total lifetime benefits, regardless of the age at which he or she claims benefits, assuming the person lives to average life expectancy. Research has shown that differential gains in life expectancy have resulted in a widening gap in the value of lifetime Social Security retirement benefits between low earners and high earners.

Over the years, deficit reduction commissions and other policymakers have recommended an increase in the Social Security retirement age. The recent proposals, for example, included the S.O.S. Act of 2016 ( H.R. 5747 , the 114 th Congress), which proposed increasing the FRA among other changes. Under the proposal, after the FRA reaches 67 for those attaining 62 in 2022, the FRA would increase by two months per year until the FRA reaches 69 for those attaining 62 in 2034. Thereafter, the FRA would increase one month every year. SSA's Office of the Chief Actuary (OCACT) projects that this option would improve the Social Security trust fund outlook by eliminating 39% of the system's projected long-range funding shortfall (based on the 2018 Annual Report of the Social Security Board of Trustees, intermediate assumptions).

Another recent proposal from the Bipartisan Policy Center in 2016 recommended, among other changes, to increase the FRA by one month every two years after the FRA reaches 67 for those attaining age 62 in 2022 until the FRA reaches 69, and also increase the age up to which the DRC may be earned at the same rate (from 70 to 72). This option contains no change in the EEA. OCACT estimates that this option would improve the Social Security trust fund outlook by eliminating 19% of the system's projected long-range funding shortfall (based on the 2018 Annual Report of the Social Security Board of Trustees, intermediate assumptions).

In 2010, the National Commission on Fiscal Responsibility and Reform (also called the Simpson-Bowles Commission after co-chairs Alan Simpson and Erskine Bowles) recommended increasing both the EEA and the FRA, among other Social Security changes. Under the commission's recommendations, after the FRA reaches 67 in 2027, both the EEA and the FRA would be indexed to increases in life expectancy. The commission estimated that the FRA would reach 68 by about 2050, and 69 by about 2075. The EEA would increase to 63 and 64 in step with increases in the FRA. OCACT estimates that this option would improve the Social Security trust fund outlook by eliminating 15% of the system's projected long-range funding shortfall.

In conjunction with proposed increases in the EEA and FRA, the commission recommended policies that would provide people with more flexibility in claiming benefits. Specifically, the commission recommended allowing people to claim up to half of their benefits at age 62 (with an actuarial reduction) and the other half at a later age (with a smaller actuarial reduction). This option was intended to provide a smoother transition for those interested in phased retirement or for households where one member has retired and another continues to work. In general, it could provide a stream of income for those with financial difficulties by allowing them to claim a portion of their benefits early and avoid taking a permanent reduction on the full benefit amount.

Recognizing that some workers may be physically unable to work beyond the current EEA (62) and may not qualify for Social Security disability benefits, the commission also recommended a hardship exemption for up to 20% of retirees. Under the proposal, as the EEA and FRA increase, certain beneficiaries could continue to claim benefits at age 62 and their benefits would not be subject to additional actuarial reductions. The commission specified that SSA would design the policy taking into consideration factors such as the physical demands of labor and lifetime earnings in developing eligibility criteria. Concerns regarding the effects of increasing the retirement age, especially on certain segments of the population, are not new. The Social Security Amendments of 1983, which increased the retirement age gradually from 65 to 67, mandated a study to examine the effects of increasing the retirement age on workers in physically demanding jobs or ill health.