Mandatory Spending

Function 650 - Social Security

Raise the Full Retirement Age for Social Security

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of dollars	2025	2026	2027	2028	2029	2030	2031	2032	2033	2034	2025– 2029	2025– 2034
Change in outlays	0	-0.1	-0.3	-0.9	-1.8	-3.2	-9.6	-16.6	-25.4	-36.8	-3.1	-94.7

This option would take effect in January 2026.

Estimates displayed in this table include budgetary effects for Social Security benefits; that spending is classified as off-budget.

The age at which workers become eligible for full retirement benefits from Social Security—known as the full retirement age (FRA)—depends on their year of birth. For workers born after 1959, the FRA is 67. (For workers born earlier, the FRA is lower.) Workers, regardless of when they were born, may claim benefits as early as age 62. Their scheduled benefit is adjusted on the basis of how much earlier or later than their FRA they choose to start receiving benefits. Up to age 70, the later a worker begins receiving benefits, the larger the monthly benefit.

Under this option, the FRA would increase from 67 by two months per birth year for workers born between 1964 and 1981. As a result, for all workers born in 1981 or later, the FRA would be 70. As under current law, workers could still choose to begin receiving benefits at age 62, but the reduction in their initial scheduled monthly benefit for claiming benefits early would be larger under this option than under current law. An increase in the FRA would reduce scheduled lifetime benefits for every affected Social Security recipient, regardless of the age at which a person claimed benefits. Under this option, workers could maintain the same scheduled monthly benefit as under current law by claiming benefits at a later age, but they would then receive benefits for fewer months.

Information about the long-term and distributional effects of this option appear in the following tables.

Table A-11. Long-Term Effects on Social Security's Finances
Percent
		Under current law	Change from current law
Spending, as a percentage of GDP
	Calendar year 2054	5.9	-0.6
	Calendar year 2098	6.7	-0.8
The 75-year actuarial balance for the combined OASDI trust funds^a
	As a percentage of GDP	-1.5	0.5
	As a percentage of taxable payroll	-4.3	1.4
The exhaustion year for the balance of the combined OASDI trust funds (fiscal year)		2034	No change

GDP = gross domestic product; OASDI = Old-Age, Survivors, and Disability Insurance.

Under this option, the full retirement age for Social Security would increase from 67 by two months per birth year for workers born between 1964 and 1981. As a result, for all workers born in 1981 or later, the full retirement age would be 70.

The estimates displayed in this table assume that benefits will be paid as scheduled under the Social Security Act, regardless of the balances in the trust funds.

a. The actuarial balance is the sum of the present value of projected income and the current trust fund balance, minus the sum of the present value of projected outlays and a year's worth of benefits at the end of the period. For Social Security, that balance is traditionally presented as a percentage of the present value of GDP or of taxable payroll over 75 years. (A present-value estimate translates a flow of current and future income or payments into an equivalent lump-sum value today.)

Table A-12. Distributional Effects
	Under current law			Change from current law^a
Lifetime household earnings quintile^b	Birth year 1960–1969	Birth year 1970–1979	Birth year 1980–1989	Birth year 1960–1969	Birth year 1970–1979	Birth year 1980–1989
	Average annual benefits for retired workers if they claimed benefits at age 65^c
	(thousands of 2024 dollars)			(percent)
Lowest	12	13	14	-3	-13	-19
Middle	23	24	26	-3	-13	-19
Highest	32	35	39	-3	-13	-19
	Average lifetime benefits relative to average lifetime earnings for beneficiaries (percent)^d
Lowest	31	32	31	*	-5	-9
Middle	17	18	18	-2	-8	-12
Highest	8	7	7	-2	-10	-14
	Ratio of average Social Security benefits to average payroll taxes over beneficiaries' lifetime^e
Lowest	2.6	2.7	2.5	*	-5	-9
Middle	1.4	1.5	1.5	-2	-8	-12
Highest	1.0	1.0	0.9	-2	-10	-14

* = between -1 percent and zero.

The estimates displayed in this table assume that benefits will be paid as scheduled under the Social Security Act, regardless of the balances in the trust funds.

a. Effects are measured as a percentage change from the current-law value. For example, under current law, the average lifetime benefits for low earners born in the 1980s will be 31 percent of lifetime earnings. The 3 percentage-point decrease in that ratio—from 31 percent to 28 percent—is expressed as a 9 percent decrease in this table.

b. The lowest, middle, and highest fifths of people within a 10-year birth cohort ranked by lifetime household earnings. For someone who is single in all years, lifetime household earnings equal the present value of inflation-adjusted earnings over that person's lifetime. In any year in which a person is married, lifetime household earnings equal the average of the couple's earnings, adjusted for economies of scale in household consumption.

c. CBO projected the benefit amounts that retired workers would receive in their first year of receiving such benefits if they began claiming them at age 65. To remove the effects of inflation on those benefits, CBO used the price index for all goods and services that make up gross domestic product. The agency computed those benefits for all people who are eligible to claim retirement benefits at age 62 and who have not yet claimed any other Social Security benefits. All amounts are net of income taxes paid on benefits.

d. Lifetime benefits include the present value of all Social Security benefits except those received by young widows, young spouses, and children, which are excluded from this measure because of insufficient data for years before 1984. To calculate present value, CBO adjusted the amounts to remove the effects of inflation and discounted the amounts to age 65. (A present-value estimate translates a flow of current and future income or payments into an equivalent lump-sum value today.)

e. Lifetime payroll taxes consist of the present value of the employer's and employee's shares of Social Security payroll taxes. To calculate present value, CBO adjusted the amounts to remove the effects of inflation and discounted the amounts to age 65.