CENTER FOR RETIREMENT RESEARCH AT BOSTON COLLEGE
For Release On July 29, 1999
Contact: Andy Eschtruth (617) 552-1729; [email protected] or Joe Hunter (617) 552-0419; >[email protected]
TO PREVENT INCREASED POVERTY, KEEP SOCIAL SECURITY EARNINGS TEST FOR 62-64 YEAR OLDS, SAYS NEW STUDY
Poverty could increase among older retirees--particularly widows--if policymakers change the way Social Security adjusts benefits for recipients who continue working, according to a new study released today by the Center for Retirement Research at Boston College. The study--co-authored by Jonathan Gruber of the Massachusetts Institute of Technology and Peter Orszag of Sebago Associates--argues for keeping the Social Security "earnings test" in place for those aged 62-64 to prevent such an outcome. Repealing the earnings test is currently under consideration with politicians from across the political spectrum supporting such a change.
Currently, under what is commonly called the earnings test, workers aged 62-69 have their benefits partially reduced if their earnings exceed certain levels--$9,600 for people aged 62-64 and $15,500 for those aged 65-69. To compensate for this reduction, they receive higher benefits in later years that, eventually, will fully offset the impact of the adjustment for the average person. To avoid the earnings test, some people delay claiming benefits. If the test were repealed, more people would claim benefits at age 62 rather than at the normal retirement age. Since benefits are reduced for early retirement, they and their spouses would receive lower annual benefits for life.
For example, average annual benefits for widows aged 90 and over whose spouses claimed early are nearly $2,000 lower than for those whose spouses did not claim early, and a significant share of this difference is due to the reduction for early retirement. While Gruber and Orszag support maintaining the earnings test for 62-64 year olds, they suggest that repealing the test for recipients aged 65 and over may be reasonable. Since this group already receives relatively larger annual benefits, such a change would be less likely to contribute to old age poverty and it could possibly encourage people to work more.
To obtain a copy of this study, call The Center for Retirement Research at Boston College at (617) 552-1762 or visit the Center's web site at www.bc.edu/crr.
The Center for Retirement Research at Boston College, part of a consortium that includes a parallel center at the University of Michigan, was established through a 5-year $5.25 million grant from the Social Security Administration. The goals of the Center are to promote research on retirement issues, to transmit new findings to the policy community and the public, to help train new scholars, and to broaden access to valuable data sources. Through these initiatives, the Center hopes to forge a strong link between the academic and policy communities around an issue of critical importance to the nation's future.
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