Many proposals have been floated to address the long-term solvency of the Social Security system, among them raising the full retirement age (FRA) so that benefits are claimed later in life. But while that may help the system, Social Security recipients may not consider it as great a boon, says a recent analysis.
“FRA increases would affect monthly and lifetime Social Security retirement benefits in complex ways given increasing differential mortality,” says the Social Security Administration in the Research, Statistics & Policy Analysis “Projecting the Effects of Retirement Age Increases and Mortality Adjustments.”
FRA is the age at which a person becomes eligible for unreduced Social Security retirement benefits. Currently it varies from 65 to 67.
The overall effect of raising the FRA alone would be to reduce Social Security retirement benefits across the board, it notes. However, the analysis also projects that increasing FRA to age 69 would have the most pronounced effect on reducing the poverty rate of those without a high school diploma, those with a high school diploma but no college degree and those in the lowest lifetime earnings quintile.
A cohort-based mortality adjustment designed to offset increasing differential mortality—which refers to differences in death rates across demographic groups—also would have a progressive effect, the analysis suggests. That approach, it says, would result lifetime benefits increasing and poverty rates falling for some groups, such as individuals with low lifetime earnings. Conversely, those with higher lifetime earnings would see their Social Security benefits fall.
And not all those who experience a reduction in their Social Security benefits due to an increase in FRA would experience hardship, the report suggests. It says that the effect would vary, because the degree to which individuals rely on Social Security for retirement income varies, as do other factors affecting their retirement income and finances.
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