The Social Security Act established 65 as the minimum age at which retirement benefits can be obtained. Raising the Retirement Ages Improves Social Security Solvency and Could Increase Economic Output

Raising the retirement ages effectively reduces benefits and thereby would improve Social Security’s solvency. However, the increase in economic activity assumes that, by remaining in the labor force for more years, older workers would not be displacing younger workers . Raising Retirement Ages Provides Incentives for Workers to Extend Their Careers, but Their Participation and the Demand for Their Labor Are Uncertain

Raising the Social Security retirement ages would provide many individuals an incentive to work longer, but whether they do depends on how the labor market responds. Still, it is unclear whether workers will want to work longer and whether employers will want to retain or hire them. One recent study, by Burkhauser and others, examined the effects of raising the ERA and concluded that such an increase would have only a limited impact on individuals in poor health because the majority of people who retire at the ERA do so because they are financially able to do it. situation, rather than a desire to retire, could discourage an older worker from remaining in the labor force. Because of the nature of their jobs, many older blue-collar workers—who compose 40 percent of the labor force between the ages of 53 and 63—experience health problems that may inhibit their ability to work and reduce the demand for their labor. An additional medical coverage issue is that individuals who are dually eligible for DI and SSI benefits are also generally eligible to receive Medicaid, which will increase costs to this program. As noted earlier, some of these new DI participants would be dually eligible for SSI and Medicaid benefits, which would impose additional costs. While raising the retirement ages will extend the life of the Social Security trust fund and could lead to higher levels of economic output, the potential negative consequences should be recognized. The magnitude of the increase depends on the extent to which individuals react to the newly created incentives to apply to these programs.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed raising the retirement age for social security benefits, focusing on: (1) how raising the retirement ages could affect social security's long-term solvency and the U.S. economy; (2) how the labor market for older workers might respond to these changes; and (3) the possible impacts from raising the retirement ages on the Disability Insurance (DI) and Supplemental Security Income (SSI) programs.

What GAO Found

GAO noted that: (1) raising the retirement ages does appear to improve the social security program's long-term solvency and could increase the nation's economic output; (2) raising the ages at which individuals can draw benefits creates incentives for workers to remain in the labor force, thereby increasing revenues to the trust fund and decreasing the amount of benefits paid; (3) the majority of older workers, aged 62 to 67, do not appear to have health limitations that would prevent them from extending their careers, and thus their labor force participation should increase as the retirement ages are raised; (4) this greater labor force participation should raise the level of economic output as more people work longer; (5) however, the extent to which labor force participation increases depends on whether sufficient jobs are available for older workers; (6) employees may be willing and able to extend their careers, but it is unclear whether employers will be willing to retain or hire them because of negative perceptions about costs and productivity; (7) blue-collar workers may be disproportionately affected by these labor demand and supply factors because they are at greater risk for incurring certain health problems that could limit their ability to remain in the labor force; (8) for example, workers in poor health who otherwise might have kept working until they qualified for social security retirement benefits may opt to apply for DI, which could increase costs to this program; and (9) in addition, SSI could also experience increased participation and higher costs because some individuals will be dually eligible for DI and SSI.