Americans Retiring Later to Boost Social Security Benefits

Oct 5, 2018 / Amanda Chase, Horsesmouth Assistant Editor

Something significant is happening in Social Security: People are retiring and taking their benefits later. These trends are at least in part the consequence of policy changes made in the early 1980s that were purposefully delayed in their implementation.

In 1997, 57 percent of men claiming their retirement benefits under Social Security were 62, the earliest age at which one can do so. By 2017, that share had dropped to 34 percent because more people elected to put off claiming their benefits. As a result, the average age of a new male beneficiary has risen by a full year.

Increased life expectancy and improved health certainly play a role, along with the transition to defined-contribution plans, which give less of an incentive for retiring early. But a less-talked about reason for delaying Social Security claiming goes back to the increase of the retirement age in 1983, from 65 to 67. Full implementation of those increases was delayed for almost 20 years, but has made a difference. This teaches us three lessons:

First, delayed implementation with gradual phase-ins makes policy reforms more politically viable. The ongoing increase in the full retirement age is currently creating almost no political backlash, because it requires no new vote by Congress and because it is happening gradually.

Second, the problem with delayed implementation is that the world can change between enactment and implementation. Policy makers in 1983, for example, likely did not foresee that life expectancy would stagnate for low- and moderate-income workers in the meanwhile.

Finally, the key role played by the full retirement age in driving decisions—well beyond what an Economics 101 model would suggest—highlights the need for more policies to take behavioral economics into account.

You can find the full opinion piece at Bloomberg.


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