As the percentage of workers who can count on a traditional defined-benefit pension is falling rapidly, we have been lowering the Social Security benefits relative to their earnings. This reduction in benefits has not been widely noted because it takes the form of an increase in the age at which workers can receive their full benefits. This had been age 65 for workers who reached age 62 before 2003.
The age for full benefits then rose gradually to age 66 for workers who reached age 62 after 2008. It remained at this age until 2017, at which point it again began to increase, reaching 67 for workers who turn 62 after 2022. This increase in the age for full benefits amounts to roughly a 12 percent reduction in the value of a worker’s Social Security.
There was a further reduction in the 1990s that received little attention because of its technical nature. Benefits are indexed after retirement to the rate of inflation as measured by the Consumer Price Index (CPI).
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