One way to reform Social Security might be to increase the minimum early retirement age to 63, from the current minimum of 62, according to U.S. Treasury Department researchers.
Policymakers also could increase the normal retirement age or change early retirement deductions and delayed retirement credits, the researchers write in an analysis of proposals for bringing Social Security obligations into better alignment with revenues.
For policymakers who want to help close the $14 trillion gap by making higher-paid workers pay more in terms of increased taxes and decreased benefits, one challenge is eliminating or reducing financial incentives for the higher-paid workers to stop working and start collecting Social Security, the researchers write.
The researchers note that increasing the normal retirement age or early retirement age could be especially effective at changing behavior, because the retirement age cut-offs appears to have a psychological effect as well as a practical effect on workers.
In the real world, “21% of male members of the 1935 birth cohort began collecting benefits within 1 year of reaching the normal retirement age…while only 13% began collecting benefits during the preceding year and less than 1% began collecting benefits during the year that followed,” the researchers write.