Social Security Reform: Raising the Retirement Ages Would Have Implications for Older Workers and SSA Disability Rolls

Source: U.S. Government Accountability Office, GAO-11-125, November 18, 2010

From the summary:
(1) While general improvements in longevity, health, and workplace conditions over recent decades suggest that most workers would be capable of working to a later retirement age, many older workers would face health or physical challenges that could prevent them from working longer. According to our analysis of preretirement age individuals using the HRS, about one-quarter of age 60-61 workers–those just prior to early retirement eligibility and most likely to be impacted by a change in retirement age–from 1998 to 2008 reported a work-limiting health condition, and about two-thirds of those who work report having a job that is physically demanding. Disability rates increase with age, suggesting that workers postponing retirement would face increasing likelihood of becoming disabled. Even healthy older workers may have trouble staying in the labor force longer as those that lose their jobs are less likely than younger workers to get rehired. (2) Raising the EEA or FRA could increase the number of applications to and beneficiaries of DI and other assistance programs, as well as change retirement benefits. Raising the EEA would postpone eligibility for retirement benefits and could cause some older individuals with work-limiting health conditions to apply for DI instead of waiting to claim retirement. Raising the FRA reduces retirement benefits for individuals who retire early, and could create a financial incentive to apply for DI benefits, which are not reduced. A few researchers have begun to study the effects of the prior increase in the FRA, and two studies conclude that the increase has led to more DI applications. SSA actuaries estimate that raising the FRA further would increase the number of DI beneficiaries. With respect to the OASDI trust funds, the actuaries project that raising the FRA would improve solvency, but raising the EEA alone would worsen solvency.

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