A New Approach to Raising Social Security's Earliest Eligibility Age
ABSTRACT While Social Security’s Normal Retirement Age (NRA) is increasing to 67, the Earliest Eligibility Age (EEA) remains at 62. Similar plans to increase the EEA raise concerns that they would create excessive hardship on workers that are worn-out or in bad health. One simple rule to increase the EEA is to tie an increase to the number of quarters of covered earnings. Such a provision would allow those with long worklives — presumably the less educated and lower paid — to quit earlier. We provide evidence that this simple rule would not satisfy the goal of preventing undue hardship on certain workers. Thus, this paper considers an alternative policy that ties an increase in the EEA to individuals’ Average Indexed Monthly Earnings (AIME). We show that allowing workers with low AIME to continue to be eligible to receive benefits at age 62 has promise as a policy to protect workers who have low earnings and are in poor health from hardship associated with an increase in the EEA.
A New Approach to Raising Social Security’s Earliest
Kelly Haverstick, Margarita Sapozhnikov, Robert K. Triest, and
While Social Security’s Normal Retirement Age (NRA) is increasing to 67, the Earliest
Eligibility Age (EEA) remains at 62. Similar plans to increase the EEA raise concerns that
they would create excessive hardship on workers who are worn‐out or in bad health. One
simple rule to increase the EEA is to tie an increase to the number of quarters of covered
earnings. Such a provision would allow those with long work lives—presumably the less
educated and lower paid—to quit earlier. We provide evidence that this simple rule would
not satisfy the goal of preventing undue hardship on certain workers. Therefore, this paper
considers an alternative policy that ties an increase in the EEA to individuals’ Average
Indexed Monthly Earnings (AIME). We show that allowing workers with low AIME to
continue to be eligible to receive benefits at age 62 has promise as a policy to protect
workers who have low earnings and are in poor health from hardship associated with an
increase in the EEA.
JEL Classifications: H55, J26, I12
Kelly Haverstick is a research economist at the Center for Retirement Research at Boston College (CRR).
Margarita Sapozhnikov is a senior associate at CRA International. Robert Triest is a senior economist and
policy advisor at the Federal Reserve Bank of Boston. At the time this paper was written, he was a visiting
scholar at the CRR. Triest’s email address is firstname.lastname@example.org. Natalia Zhivan is a graduate research
assistant at the CRR.
This paper, which may be revised, is available on the web site of the Federal Reserve Bank of Boston at
The views expressed in this paper are solely those of the author and do not necessarily represent those of the
Federal Reserve Bank of Boston, the Federal Reserve System, or the opinions or policy of SSA, any agency of
the federal government, or Boston College.
The research reported herein was performed pursuant to a grant from the U.S. Social Security Administration
(SSA) funded as part of the Retirement Research Consortium.
This version: October 2007
Social Security’s Normal Retirement Age (NRA) is currently rising from age 65 to
age 67. An individual must wait until the NRA to claim full benefits; benefits claimed at
an earlier age are actuarially reduced. Despite the rise in the NRA, the Earliest Eligibility
Age (EEA)—the earliest age individuals can claim reduced benefits—remains at 62. A
question facing policymakers is whether the EEA should be increased to 64 to match the
increase in the NRA. Increasing the EEA would not alter Social Security’s financial state
since benefit reductions for a person with average life expectancy are actuarially fair—
benefits are lowered to offset the longer claiming period. However, a rise in the EEA
would protect workers from facing an increased risk of impoverishment in old age due
to their myopically claiming benefits too early.
Raising the EEA involves making a tradeoff between ensuring retirement income
adequacy and insuring workers against the prospect that they will find it difficult to
work or find jobs as they age. As the NRA increases, there is a reduction in the benefits
payable to a worker claiming at any age below the NRA. This reduction raises the
concern that workers may myopically claim benefits too early, making it difficult for
them to maintain their living standard during retirement. The prospect of future
increases in Medicare premiums and out‐of‐pocket medical expenses imply that this
problem will likely grow in importance, especially in the case of widows or widowers
relying on survivors’ benefits as their primary source of income.
Increasing the EEA prevents workers from putting their future standard of living
at risk, but it does so at the cost of potentially causing hardship for those workers who
find it difficult to work at ages younger than the NRA. Individuals who have physically
demanding jobs may find work to be increasingly onerous as they age, yet they may not
have health problems serious enough to qualify for disability benefits. If such
individuals lack adequate private pension benefits or other financial resources, then an
increase in the EEA would require them to either rely on inadequate income or prolong
their working lives when they would instead prefer to retire.
To avoid hurting those unable to work, some have proposed tying the EEA to the
length of a worker’s labor force participation. The idea of differentiation based on labor
force participation rates has an intuitive appeal and is easy to implement. Those who
went to college and thus delayed entry into the workforce usually have a safer working
environment, higher incomes, better health, and longer life expectancies, and thus can
remain in the labor force more easily. While health status, ability to work, or even level
of education are not directly observed by the Social Security Administration,
information on earnings and number of quarters of covered earnings are routinely used
to determine eligibility and the level of monthly benefits.
One simple proposed scheme would give workers an option of retiring at 62 and
claiming unreduced benefits if they have spent at least 35 years in the labor force.
Everybody else’s EEA would be moved to 64. Credit years would be assigned to women
to reflect the number of years spent caring for young children.
Our analysis demonstrates that policy rules that tie eligibility for unreduced
benefits at age 62 to labor force participation fail to help those who are in poor health.
Unhealthy workers are simply unable to obtain 35 years of labor force participation,
while workers in good health satisfy the proposed test for eligibility. Healthy workers,
however, tend to postpone claiming and retiring until a later age regardless of the EEA.
Thus, tying the EEA to the length of a worker’s labor force participation would not help
many individuals who are unable to work because of poor health or an inability to find
jobs in their 60s.
While the number of covered quarters is a poor measure of health status,
earnings are a good predictor of health, wealth, and job prospects later in life. Our
analysis shows that tying the EEA to the Average Indexed Monthly Earnings (AIME)
may have some potential. Admittedly, this method is more complex (with decisions to
be made concerning cutoff values for eligibility), so further research is necessary to
determine the feasibility of such a rule.
This paper is organized as follows. Section II discusses the data used and
provides descriptive statistics for the sample. Section III summarizes the results of
bivariate probit regressions of the decisions to claim early benefits and to exit the labor
force. Section IV puts forth a simple rule for raising the EEA and considers its effects,
including why it does not meet our goal of protecting the most vulnerable workers. This
section then describes an alternative rule to raise the EEA based on a worker’s earnings;
this approach would better satisfy our main objective. Section V concludes.
II. Data and Sample
To consider potential rules for increasing the EEA, this analysis uses the RAND
public version of the Health and Retirement Study (HRS) and the SSA Administrative
Data (SSAA), which contain seven waves of data (1992–2004).1 The sample selection
process follows that of Panis et al. (2002) and is shown in Figure 1. We begin with 10,560
individuals. We require that respondents reach the age of 63 by the 2004 wave, have the
Social Security benefit type available, have quarters of covered earnings information, are
not widow(er)s, do not receive care for a dependent child under the age of 16, and do
not clearly misrepresent their information.2 This leaves a final sample of 3,277
Each individual in our sample is classified into one of six categories based on the
claim of Social Security benefits.3 These categories are determined using the “Type of
benefits received from Social Security” and the “Type of supplemental (other) benefits
received from Social Security” variables in the SSAA data:
“Takers”: Individuals who receive their own Old‐Age and Survivors
Insurance (OASI) benefits at 62 years of age;
“Postponers”: Individuals who are eligible for their own early OASI
benefits but claim after age 62;
1 Specifically, we use the HRS Cohort: Respondent Earnings and Benefits data file.
2Widow(er)s become eligible for benefits at the age of 60 and are not directly affected by a higher EEA.
Thus, 478 observations identified as widow(er)s were excluded.
3 These categories were defined using the method of Panis et al. (2002).