Congress has shown interest in changing Social Security retirement and survivor policies to encourage older individuals to work longer Image: Alexey Rotanov/Shutterstock.com
A report for Congress has mapped how changes to Social Security benefits affects decisions on when to retire, finding that some have resulting in working longer while others have resulted in earlier retirements.
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“Social Security can affect older workers’ employment and retirement decisions in several ways. From the wealth aspect, Social Security provides resources that make retirement possible. From the benefit accrual aspect, working longer may mean paying more Social Security payroll taxes and having more earnings included in the benefit calculation. Additionally, delaying Social Security claiming may mean receiving benefits for a shorter time but with higher monthly benefits,” the Congressional Research Service said.
For example, it said that among those 60-70, the share in the workforce declined from 1968 to 1994 from 40.8 to 29.6 percent, while the share of those drawing Social Security benefits increased from 44.6 to 63.7 percent. Notably, it said, that followed the enactment in 1961 of the option to retire earlier than what was then the sole standard age for drawing benefits of 65.
Similarly, it pointed to the increase in the full retirement age enacted in a 1983 Social Security reform law as pushing the trend in the opposite direction. That law kept the option to draw benefits as young as age 62 but increased the penalty for doing so, with the penalty increasing as the full benefits retirement age increased—first to 66 over six years and currently being phased up to 67.
Following that change, it said, over 1994 to 2022, share of those age 60-in the workforce increased from 29.6 to 43.5 percent, while the share receiving Social Security benefits decreased from 63.7 to 44.8 percent.
Such impacts are a consideration currently, the report said, because “Congress has shown interest in changing Social Security retirement and survivor policies to encourage older individuals to work longer and postpone claiming Social Security benefits. This can partially improve Social Security’s financial outlook, because late benefit claimers may contribute more to the Social Security program by working longer and paying more Social Security payroll taxes.”
“Supporters of those polices contend that the average life expectancy is increasing, health conditions of older workers are improving, and job characteristics are more suitable for older workers. Opponents often argue that low-wage workers or lower-educated workers may be adversely affected by those policies, such as a further increase in the retirement age,” it said.
“To address these concerns, policymakers and researchers have suggested some possible approaches that could accompany those policy changes and might offer certain income protections to vulnerable older adults,” it added.
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