Does social security encourage early retirement?
If Americans are worried about Social Security's finances, they should be talking about the early retirement age, not privatisation, says Jonathan Gruber, an economist at the Massachusetts Institute of Technology.
The government effectively established 62 as the official retirement age in 1961 when it lowered the age at which men could receive Social Security benefits though at a reduced rate from 65 to 62 for men. It was lowered for women in 1956.
Everywhere in the industrialised world, people retire as soon as government benefits kick in:
Fewer than 20 percent of people ages 60 to 64 work in France, Belgium and Italy, where the early retirement age is 60 or younger.
In the United States, the percentage of men still working at age 63 has fallen from 78 percent in 1960 to 48 percent today; some of these men work part time and collect Social Security.
Americans are retiring earlier half retire at age 62 and living longer; people collect benefits an average of seven years longer than they did in 1960.
Long retirements force Social Security to pay a retiree benefits for more years than the system was designed to handle. Early retirements also remove workers from the labour force, meaning less payroll taxes to finance the program.
Source: Dennis Cauchon, Social Security gets stretched, strained by long retirements, USA Today, January 25, 2005.
For text: http://www.usatoday.com/news/nation/2005-01-24-social-security_x.htm
For more on Social Security: Case for Reform: http://www.teamncpa.org/
FMF Policy Bulletin/ 08 February 2005
Publish date: 16 February 2005
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.