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Economic Effects of Raising Age to Collect Social Security

Many plans to restore long-term solvency to the Social Security system include a proposal to raise the age of eligibility for full retired worker benefits, known as the normal retirement age. The objective of this AARP Public Policy Institute Issue Brief by Satyenda Verma and Sara E. Rix is to determine how Social Security benefits, the trust funds, compensation, income, and savings would be affected if the labor force participation rate of older persons were to rise.

Using econometric simulation models, the brief explores the impact of rising participation in the 65-plus population. In the two scenarios examined, participation increases (1) at the rate projected by the Bureau of Labor Statistics through 2029 and (2) at a rate that would bring participation back to where it was in 1950, when it began its steep decline from 26.7 percent to 13.1 percent in 2001. For each scenario, the paper compares what happens if Social Security benefits are paid out at the normal retirement age, which is increasing to age 67, or at age 70. (13 pages)

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