The Social Security Early Retirement Benefit as Safety Net

As the baby boom generation begins to retire and fiscal pressures from entitlement programs become more acute, evidence of improving health and increasing life expectancy in these cohorts has led many to suggest taking advantage of improved work capacity among older adults by increasing age requirements for the Social Security and Medicare programs. Currently, however, more than half of workers start receiving Social Security benefits before they reach full retirement age, and many of those who do are in relatively poor health. Data from the 1990 Census show that roughly one-half of men and one-third of women out of the workforce at age 62 identify themselves as having a health condition that limits their ability to work (Bound et al., 2000). While the health of the average 62 year old may well have improved, policies that reduce availability of benefits (e.g., raising the early retirement age), or reduce their value (raising the full retirement age, thereby reducing monthly benefits for early retirees) will affect both the healthy and unhealthy alike. The purpose of this paper is to systematically investigate the extent to which the availability of early Social Security benefits provides a safety net for those in poor health, who are either not in poor enough health to be eligible for disability benefits or who, for whatever reason, did not apply for them.