What is “normal retirement age”?

Last updated on: September 23, 2016 at 9:30 am by Jane the Actuary

What is “normal retirement age”? 2016-09-23T09:30:05-06:00 Jane the Actuary

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Just a question, for now, for reader thoughts.

There were a couple articles I came across recently about retirement trends with a common theme. For instance, an article that women were retiring at a later age than in the past, since they’d typically retired “young” because, on average, they were younger than their husbands, and wanted to retire alongside him when he left at a “normal” retirement age. Another article, featuring a man trying to make up for lost time, lest he need to retire at the too-old age of 70. Another article, on the other hand, proposing moving the eligibility for Medicare from 65 to 62.

Folks, the normal retirement age for Social Security had been 65 since its implementation — but for people retiring now, and for the past 7 years, it’s already moved to age 66, and will continue to increase until, for those of us born in 1960 or later, normal retirement age will be age 67.

Now, in practical terms, what this means is that the baseline benefit formula is calculated based on a retirement at that specified age. Social Security will still let you retire as early as age 62, but if you continue to do so, or even if you stay at that old norm of 65, you’ll experience a benefit cut relative to your elders. (Other countries don’t let you take benefits early; and we could have adjusted the early retirement age from 62 upwards, but didn’t.)

So the only way in which, in practice, this NRA change will work as a true “retirement age” change rather than a benefit cut, is if, in actual practice, workers actually start delaying retirement. (Yes, I know that’s circular.) And the fact that Medicare begins at age 65 works against this, because it reinforces the idea that retirement begins at 65.

So I would be curious as to whether or not public opinion has evolved on this point or not. In other words, if you asked a group of people what they thought “retirement age” was — when you’re neither “retiring early” nor “retiring late” but retiring at the “normal” time — what would they say? Has there been any shift? Likely not.

And since I’ve never seen such a poll, I’ll ask my readers, as a proxy. What do you think?

image: https://commons.wikimedia.org/wiki/File:Social_security_card.gif; originally produced by the Social Security Administration and in the public domain

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