Social Security Retirement Age Has Already Been Raised to 67

March 29, 2024

This is apparently news to BlackRock CEO, who is apparently believes it is still 65, according to a New York Times Dealbook piece.

“No one should have to work longer than they want to. But I do think it’s a bit crazy that our anchor idea for the right retirement age — 65 years old — originates from the time of the Ottoman Empire.”

The reforms to Social Security put in place in 1982 provided for a gradual increase in the normal retirement age from 65, for people turning 62 before 2002, to 67 for people turning 62 after 2022. It is also important to recognize that there is not a single age where workers start collecting benefits. They can begin getting benefits as early as age 62, but their payment will be reduced by roughly 6.0 percent for every year between the normal retirement age and the age where they start collecting benefits.

This means, for example, that a person who starts collecting benefits this year at age 62 would get roughly 30 percent less than their full scheduled benefit. (This is age 67 minus 62 [5 years] times 6 percent.)

For people who start collecting benefits after the normal retirement age, benefits increase by approximately 8 percent a year. This means that if someone who is 62 today waits until age 70 to start collecting benefits, they will get a boost to their benefits of roughly 24 percent (3 years times 8 percent). For this reason, the focus on the retirement age can be misleading, the issue is really a schedule of benefits.

This is important to keep in mind for those who think it would be good for people to work later in life. There is an obvious route to pursue if we want people to retire later that doesn’t involve reducing benefits. Instead of cutting off at age 70, we could have benefits increase to age 72 or even later.

This change is costless since the increase is set based on people’s life expectancy. That means that if people retiring at age 72 get 16 percent more each year than people who start collecting benefits at age 70, they can expect to collect benefits for a period that is 16 percent shorter. This is a simple and costless fix that should give people an incentive to retire later, if that is the outcome we are looking for.

It is also worth noting that if we think AI will take all the jobs then it is foolish to be worried that we need older people to work longer. We will not be facing a shortage of labor in that story.


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