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Can the Actuarial Reduction for Social Security Early Retirement Still Be Right?

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  • Alicia H. Munnell
  • Steven A. Sass

Abstract

The option to claim Social Security benefits earlier than the program’s Full Retirement Age, in exchange for receiving an actuarially reduced benefit, is a key feature of the nation’s Social Security program. This principle remained in place when Congress increased the Full Retirement Age from 65 to 67. Most workers choose to claim early and retire on the reduced benefits. The option to claim early was enacted over 50 years ago, when Congress set 62 as the program’s Earliest Age of Eligibility. To make up for the extra three years of benefit payments, those claiming at 62 received 20 percent less in monthly benefits than if they had claimed at 65. Despite a significant increase in life expectancy in the intervening years, benefits claimed at 62 today are still about 20 percent less than benefits claimed at 65. This brief asks whether this actuarial reduction is still correct...

Suggested Citation

  • Alicia H. Munnell & Steven A. Sass, 2012. "Can the Actuarial Reduction for Social Security Early Retirement Still Be Right?," Issues in Brief ib2012-6, Center for Retirement Research, revised Mar 2012.
    • Handle: RePEc:crr:issbrf:ib2012-6
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    File URL: http://crr.bc.edu/briefs/can-the-actuarial-reduction-for-social-security-early-retirement-still-be-right/
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    Cited by:

    1. Kluth, Sebastian, 2014. "Should I Stay or Should I Go? The Role of Actuarial Reduction Rates in Individual Retirement Planning in Germany," MEA discussion paper series 201409, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    2. John Shoven & Sita Slavov, 2013. "Recent Changes In The Gains From Delaying Social Security," Discussion Papers 13-019, Stanford Institute for Economic Policy Research.
    3. Kluth, Sebastian, 2014. "Should I Stay or Should I Go? The Role of Actuarial Reduction Rates in Individual Retirement Planning in Germany," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100413, Verein für Socialpolitik / German Economic Association.
    4. Frank W. Heiland & Na Yin, 2014. "Have We Finally Achieved Actuarial Fairness of Social Security Retirement Benefits and Will It Last?," Working Papers wp307, University of Michigan, Michigan Retirement Research Center.

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