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1 1 (March 15, 2022)

handle is hein.crs/govegmi0001 and id is 1 raw text is: Congressional Research Service Inforrning the Iegislative debate since 1914 Updated March 15, 2022 Social Security Retirement Benefit Claiming Age Background Social Security provides monthly cash benefits to retired or disabled workers and their family members, as well as to the family members of deceased workers. The Social Security full retirement age (FRA) is the age at which retired workers can first claimfull Social Security retired- worker benefits. The FRA was 65 at the inception of Social Security in 1935. As part of legislation enacted in 1983 (P.L. 98-21), starting with workers born in 1938, the FRA increased by two months every birth year until the FRA reached 66 for workers born in 1943 to 1954 and then increased again in two-month increments until the FRA reached 67 for workers born in 1960 or later. Retired workers can claim retirement benefits as early as age 62 (the earliest eligibility age, or EEA). Benefits claimed between age 62 and the FRA, however, are subject to a permanent reduction for early retirement. For each of the 36 months immediately preceding the FRA, the monthly rate of reduction from the full retirement benefit is five- ninths of 1%. For each month earlier than three years (36 months) before the FRA, the monthly rate of reduction is five-twelfths of 1%. Therefore, for a worker with an FRA of 65, claiming benefits at 62 results in a 20% permanent reduction in his or her monthly benefit. The reduction is 25% if the FRA is 66 and 30% if the FRA is 67. A retired worker who claims benefits after the FRA may receive a delayed retirement credit (DRC). The maximum age at which the DRC applies is age 70. Any further delay in claiming benefits past age 70 does not result in a higher benefit. Under current law, the amount of the credit varies based on the worker's year of birth. The credit for workers born in 1943 or later is 8% per year. Age Distribution of Social Security Benefit Claims for Retfred Workers By Calendar Year Before 2000, most retired workers claimed their retirement benefits at either age 62 (the EEA) or the FRA. In most years between 1985 and 1999, about three-quarters of retired-worker benefits were awarded to workers who claimed benefits at age 62 or the FRA (see Figure 1), 20% were awarded to retired workers older than the EEA but younger than the FRA, and the remaining 5% were awarded to retired workers who claimed benefits after the FRA. However, the age distribution of Social Security benefit claims has shifted to later ages in the past two decades. Several factors are likely to have contributed to the change in Social Security benefit claiming ages, including changes in the FRA, the retirement earnings test (RET), the DRC, the economic environment, and the population age distrihtion. Figure I. Social Security Retired-Worker Benefits, Claiming Age Distribution, 1985-2020 ' fAad R icesdfo Source: Social Security Administration, Annual Statistical Supplement, 2000-2021, Table 6.A4, and Table 6.B5. Notes: The RET was repealed in 2000 for workers who have reached the FRA (P.L. 106-182). The proportion of retired workers who claimed Social Security benefits at age 66 includes those between ages 66 and 69 during 1985-1998. In 2000, for those reaching age 62, the FRA began to increase. Starting with retired workers born in 1938, the FRA increased from age 65 in two-month increments until the FRA reached 66 for workers born in 1943-1954. As a higher FRA results in a larger benefit reduction at age 62, the proportion of retired workers who claimed benefits at the FRA has increased and those who claimed benefits at age 62 has declined since 2003. The trend was affected by the economic recession (2007-2009) when some people claimed Social Security benefits early in response to the high unemployment rate. When the FRA reached age 66 for those born in 1943, age 66 replaced age 65 as the second peak age at which retired workers claimed Social Security benefits. Since then, there has been a continuing decline in the proportion of retired workers who claimed benefits at age 62 and an increase in the proportion of retired workers who claim benefits at the FRA of 66. The proportion of retired workers who claimed benefits at age 65 dropped but still remained above 11% after 2009. The RET results in a withholding of monthly benefits for Social Security beneficiaries whose earnings exceed certain thresholds set in law. In 2000, Congress repealed the RET for workers who have reached the FRA (P.L. 106-182) in order to encourage older people to work. The earnings test now applies only to beneficiaries who are under the FRA. Numerous studies have found evidence that this provision encouraged more workers at and above the FRA to claim FRA increased fromn 65 to 66 for those turning age 62 -l 6%Age 62 Age 65 Age 66

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