Can the Actuarial Reduction for Social Security Early Retirement Still Be Right?
The brief’s key findings are:
- Monthly Social Security benefits claimed at age 62, rather than 65, are reduced about 20 percent to avoid additional costs to the program.
- When the reduction was set over 50 years ago, a worker claiming at 62 received benefits about 20 percent longer. As life expectancy has risen, this worker now receives benefits only about 15 percent longer.
- But the cost of benefits, the present discounted value of lifetime benefits, also depends on interest rates. Rates have generally risen since the 1960s, making future benefits less costly.
- These higher rates have largely offset the impact of rising life expectancy, suggesting that the reduction factor has proven remarkably durable over time.