Three Andrews in Support of Raising the Early Retirement Age
Andrew Biggs has an interesting piece out at the American Enterprise Institute that has been generating some attention (see Ezra Klein’s comments here, Andrew Samwick’s contribution here, and Andrew Sullivan’s addition here). Biggs states that raising the early retirement age (or EEA, for Earliest Eligibility Age) from 62 to 65 would increase retirement security, increase non-Social Security tax revenue, increase economic growth, and (believe it or not) increase Social Security benefits. Sounds like a win-win-win-win.
Generally, the EEA is not talked about as a tool for improving Social Security's solvency, since raising it has no real substantial effects on Social Security costs and revenues. In line with that, Biggs estimates that the life of the Trust Fund would be extended only five years and the actuarial balance would stay the same if the EEA was raised. Biggs looks at the changes in retirement income and GDP assuming the scheduled increase in the full retirement age (FRA) to 67 and a phased-in increase of the EEA between the years 2015 to 2024. The changes he finds are truly astonishing.
Though there are many benefits to raising the EEA, there are still some drawbacks. Biggs suggested ways to accommodate the typical concerns associated with raising the retirement age, such as protecting older Americans who simply cannot work. Disability Insurance would be able to cover those workers and the eligibility age for Supplemental Security Income (SSI) could be lowered to 62 for those who didn't have a sufficient work history to qualify for DI benefits. Other policies to ease the transition to a higher EEA include reducing payroll taxes on older workers, letting Medicare be the primary payer of health care for older workers instead of employer-sponsored insurance, and eliminating the Retirement Earnings Test (which reduces Social Security benefits if the recipient has earned income over a certain amount) for workers between ages 65 and 67.
Biggs' analysis shows the great economic benefits of a longer working life. Having more pension income and Social Security income and having less retired years to rely on it have the double effect of helping retirement security. In addition, Biggs shows that if people work longer (if they can), it can be a boon to economic growth and interact greatly with other parts of the budget by increasing tax revenue. While raising the EEA doesn't help with Social Security’s solvency, it certainly brings many benefits and can be a useful component in an overall reform plan, like it is in our Let's Get Specific Social Security plan.
Be sure to check out Andrew Samwick's 6 additional points to this discussion.