The Full Retirement Age

Individuals can claim old-age Social Security benefits as early as age 62, and monthly benefits increase as one delays claiming up to age 70, but the so-called full retirement age (FRA)—currently 67—is the age at which an individual can claim a monthly benefit equal to their primary insurance amount (PIA). For every month before FRA that a retiree claims benefits, the Social Security Administration permanently reduces that person’s monthly benefit amount; for every month after FRA that an individual waits to claim benefits, SSA permanently increases the benefit amount. Benefits claimed at any age are intended to be actuarially equivalent: someone who lives to the age of average life expectancy will receive lifetime benefits of approximately the same net present value regardless of when they claim.

In 1983, Congress increased the full retirement age (FRA) from 65 to 67, a change phased in over the course of 33 years. This phase-in just ended, with the FRA now static at age 67 for individuals reaching age 62 in 2022 or later. But experts predict that average U.S. life expectancy will continue to increase, as shown in Figure 1. As Americans live longer—and spend longer in retirement—Social Security outlays will continue to grow at an unsustainable pace.

Figure 1: Remaining Life Expectancy (in Years) at Age 65

A Gradual FRA Increase

Continuing to gradually increase the FRA over time would reduce the need for other benefit cuts and tax increases while ensuring ample notice to workers planning for a higher FRA when making savings and retirement decisions.

The Bipartisan Policy Center’s Commission on Retirement Security and Personal Savings previously proposed raising both the FRA and the maximum benefit age (currently 70) by one month every two years (beginning six years from enactment). These gradual increases would continue for 48 years until the FRA reached 69 and the maximum benefit age reached 72, while the earliest age of eligibility would remain at 62.

If projected longevity trends materialize, a gradual increase in the FRA would mean that, decades in the future, individuals who claim benefits when they reach the FRA would, on average, spend approximately the same proportion of their lives (around 27%) covered by Social Security retirement benefits as they do today. And this would still be a substantially higher proportion of their lives spent in retirement than previous generations of beneficiaries. Failure to increase the FRA to reflect increases in longevity would amount to an unplanned increase in program benefits.

SSA’s Office of the Chief Actuary estimated that enacting BPC’s proposal would significantly bolster the solvency of the Social Security trust funds, closing approximately 15% of the long-range shortfall.

Complementary Reform Options

Increases to the FRA provide a large financial boost to the Social Security trust funds because they reduce the benefit amount available to a claimant at any given age. After a full phase-in of the FRA increase, a retiree at any age between 62 and 72 would have to delay claiming by two years to receive the same benefit as they would have received before the phase-in. Although some retirees can afford to delay, many cannot.

Further, the steady longevity increases shown in Figure 1 have not been shared evenly across the income distribution, and the life-expectancy gap between upper- and lower-income individuals has grown over time. One study found that, for men born in 1930, those in the highest income quintile had a life expectancy at age 50 that was 5.1 years longer than those in the lowest quintile. For men born in 1960, that discrepancy had grown to 12.7 years. (The study observed similar patterns for women.)

Increasing the FRA will, on average, disproportionally curtail total lifetime benefits for lower-income workers with shorter life expectancies. Complementary policies could help ensure that Social Security old-age benefits continue to provide adequate financial security for those most in need. These could include:

• Establishing a new basic minimum benefit (BMB). Supplementing standard Social Security payments for low-income beneficiaries with a BMB could help offset the impact of raising the FRA on beneficiaries with shorter life expectancies or those who—due to the nature of their work, health concerns, or some other reason—cannot delay claiming. The specific BMB amount would be scaled so that those with the lowest Social Security benefits would receive the largest BMB add-on payments. Total benefits, however, would always increase with additional covered earnings, preserving the incentive for lower earners to continue working.
• Increasing the progressivity of the benefit formula. Although the current formula is progressive—with earnings at lower levels replaced at higher rates—increasing its progressivity would help offset the regressive impact of an increase in the full retirement age.