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Is it a mistake to allow people to claim Social Security at 62 -- even at a reduced rate -- when we are living longer than we did when the program first started?
The Center for Retirement Research at Boston College examined this question and came to the surprising conclusion that the actuarial assumptions made in 1960, reducing the amount of people who claimed at 62, are still a fairly accurate reflection of the cost -- even though we're living 20 years longer.
I think this retirement planning math is interesting and argues strongly for the long-term stability of the Social Security program.
When Congress first allowed early claiming for both men and women in 1961, it set the benefit reduction for early retirement at five-ninths of 1 percent for each month a participant claimed before the program’s full retirement age of 65. Benefits claimed at age 62 were reduced 20 percent (five-ninths of 1 percent per month times 36 months). Participants who would have gotten $1,000 a month at 65 got roughly $800 a month at 62.
Over the last 50 years, this calculation has been basically unchanged even though average life expectancy at 65 is now 20 years -- five years longer -- than it was in 1960.
The center says that at first blush -- because life expectancy is longer -- today's participant who claims at age 62 instead of age 65 receives benefits only 15 percent longer (three years divided by 20 years). The center says that all things being equal, to keep costs constant, the monthly benefit could be reduced by 15 percent rather than 20 percent.
But there are other factors. The biggest of them, the center explains, is interest rates. Interest rates affect the amount the government has to set aside to pay for future obligations. A higher interest rate shrinks the cost of paying benefits claimed at age 65 more than it shrinks the cost of benefits claimed at age 62.
Because interest rates rose between 1960 and 2004, the original 20 percent reduction remained actuarially correct for many years, but since 2004, interest rates have dropped sharply. That reduction has made the cost of benefits claimed at 62 about 96 percent of the cost of benefits claimed at 65. By 2050, rising longevity could further reduce the cost of benefits claimed at 62, with the rise of full retirement age to 67 further complicating the calculation.
The bottom line is a difference that is very tiny and changing constantly. Since changing benefit calculations every time interest rates or longevity predictions change isn't practical, sticking with the tried and true seems like the best approach. The center concludes that given the other serious problems facing Social Security, this issue "isn't worth a prominent place on the national agenda."
I was driving a tour bus and falling asleep so I went for eairly retirement, can't even say awake in the patio or parlor and or chatting on line with friends, do not wish to kill myself or my passengers so I hung it up
Those asses we have in Washington have no clue how the real person lives. Sure,politicians have all kind of time off, they vacation several times a year, they play golf all weekend, they have the best medical insurance--yes they will live to be 80 or 90, but most people I know including myself works 40 plus a week now for 41 years. Some men and women, including myself have worked more than one job at a time to send the children to college. I am in stage five kidney disease and can not get disability. I will never live long enough to see one SS check. Washington really hopes one will die from illness or accident so not one cent is paid out. The whole situation makes me more ill than I am. \
You are a genius! In a short articles, you have spoken volumes.
Thank You!
Your correct when you say they're trying to figure out how to take benefits away from the working class people. And what about the politicians in Washington? They don't even pay for insurance. After 2 terms they have a pension for life?
The working people deserve a rest after 60 + years.
I was laid off its been more than a year not I cannot find a job as yet I am 62 and I am thinking after my unemployment runs out what can I do i have my mortgate to pay my hosband is in hit eighties and still working to make ends meet must I take my sociaal security.
A bird in the hand is better than two in the bush!
I have no problem with people 62 getting social security. I do have a problem with people that draw a civil service type pension being penalized. By civil service I mean Federal retirees, school teachers, some police and fire fighters to mention a few. There is a Government Pension Offset and Windfall Elimination Provision that cuts a civil service retiree by 2/3 even though they have worked outside of civil service type work and have paid into the social security fund. I feel they are getting penalized for supporting the work of the Government. THis needs to be changed but our congressman are afraid to do something about it.
NO,I SAY LEAVE THE SS ALONE,YOU CANT SEEM TO MAKE UP YOUR MIND,,WHERE THE STOPPING POINT IS AND SOME PEOPLE AFTER RETIREMENT WANT TO TRAVEL IF THEIR BUDGET FITS,,HOWEVER,I HAD TO TAKE DISABILITY AT A YOUNGER AGE BECAUSE OF MY BACK,AND ALONG THE WAY OTHER THINGS STARTED FALLING APART,,SIEZURES,SLEEP APNEA,SPINAL STENOSIS,A HERNIATED DISC,HIGH BP,AND A FEW MORE,IF I WAS ASKED TO GO BACK, I WOULD SAY NO POSSIBLE WAY,NOW SINCE MY DAD SERVED 23 YRS IN THE MILITARY,BOTH MY MOM & DAD WORKED,PLUS WHAT THE GOVERNMENT TOOK FROM OUR TRIBES,YES I AM NATIVE AMERICAN,,I FEEL I SHOULD NOT HAVE TO WORK AGAIN THE REST OF MY LIFE,,I WORKED SINCE I WAS 14 & GOT A DIPLOMA..NO LEAVE THE SS ALONE..
Took it at 62 and within 6 mos had a triple bypass. When I recovered I went for my physical and they discovered stage 3 Colon Cancer.After my recovery from that here comes periferal artery disease. They may speak of living longer but in what kind of health.I worked all over the world in very dangerous conditions but my body payed for it. Thank you SS. Thank you IBEW for retirement. The pols want to eliminate any sort of benefits and the middle class.
[I TOOK SS AT 62] ....I WAS ON LIGHT DUTY [PAINTER] AT MY JOB AFTER I HAD A WRECK AT WORK.I CAME BACK TO WORK SO I COULD CO-SIGN A HOME LOAN FOR MY SON ON A NEW HOUSE,HE AND HIS NEW WIFE BUILT.THE WORKERS COMP PEOPLE WERE DELIGHTED TO PUT MY BROKE UP CARCASS BACK ON THE JOB.THIS LASTED FROM JAN 1,2008 UNTIL MAY 24,2010 WHEN I TURNED 62.WELL,,MY SON WAS LAID OFF,STAYED ON EXTENDED UN-EMPLOYMENT UNTIL IT ENDED.HE COULD NOT BUY A JOB,MUCH LESS FIND ONE.HE HURT HIS BACK HELPING MY BROTHER,NO JOB AND NO INSURANCE COVERAGE...AT LEAST MY BRO'S HOME OWNERS COVERED IT..I WAS RENTING A MOBILE HOME TO HELP MY MOTHER WHEN DEMENSIA OVER TOOK HER AND I HAD TO MOVE..IN MY SON'S HOUSE,,MY CHECK GOES TO THE HOUSE PMT. AND BILLS...I WAS TOLD TO GET MY SS AT62 AS TO APPLY FOR DISABILITY..WHICH I DID,,IT TOOK ABOUT 15 MONTHS TO GET IT GOING,,,NOW I AM 65 THIS MONTH AND IT REVERTS BACK TO SS AGAIN..AFTER THE RECESSION,HOUSING BUBBLE BURST AND BOTH SONS BUILDING NEW HOUSES ON THE SAME STREET,AT THE SAME TIME AND TWO PRESIDENTS,,REPUBLICAN AND DEMOCRAT..I WILL SAY THIS; IF YOU ARE STILL ALIVE AT 62,GET IT QUICK...WE ARE NOT IN CONTROLL OF THE USA...NEITHER ARE OUR CHILDREN ...WE ARE BEING LED INTO A GLOBAL WELFARE SYSTEM....THE DAY WHEN SS WAS AN OPTION,WAS WHEN JOBS WERE PLENTIFUL...TODAY IT'S MULTI-GENERATIONAL HOUSING THAT WE ARE GOING TO....THAT IS WHAT THIS ECONOMY IS PUSHING PEOPLE INTO..SO HERE I SIT,OLD AND GRAY,WAITING ON THE MONTHLY CHECK,FOR THE HOUSE PMT.I WILL PAY..WHAT'S THE USE TO VOTE...IT'S OVER,THEY GOT MY GOAT...I HAVE REACHED THE FUTURE...MY SONS,THERE IS NO GREATER GIFT THAN THIS.......THE END.