1) Social Security Primer
https://crsreports.congress.gov/product/pdf/R/R42035
Summary: Social Security provides monthly cash benefits to retired or disabled workers and their family members, and to the family members of deceased workers. Among the beneficiary population, 84.7% are retired or disabled workers; family members of retired, disabled, or deceased workers make up the remainder. In April 2022, approximately 65.5 million beneficiaries received a total of $100.8 billion in benefit payments for the month; the average monthly benefit was $1,538.
Workers become eligible for Social Security benefits for themselves and their family members by working in Social Security-covered employment. For 2022, an estimated 94% of workers will work in paid employment or self-employment covered by Social Security, and their earnings are subject to the Social Security payroll tax. Employers and employees each pay 6.2% of covered earnings, up to an annual limit on taxable earnings ($147,000 in 2022).
Among other requirements, a worker generally needs 40 earnings credits (10 years of covered employment) to be eligible for a Social Security retired-worker benefit. Fewer earnings credits are needed to qualify for a disabled-worker benefit; the number needed varies depending on the age of the worker when he or she became disabled. A worker’s initial monthly benefit is based on his or her career-average earnings in covered employment. Social Security retired-worker benefits are first payable at the age of 62, subject to a permanent reduction for early retirement. Full (unreduced) retirement benefits are first payable at the full retirement age (FRA), which is increasing gradually from 65 to 67 under a law enacted by Congress in 1983. The FRA will reach 67 for persons born in 1960 or later (i.e., persons who become eligible for retirement benefits at the age of 62 in 2022 or later).
In addition to payroll taxes, Social Security is financed by federal income taxes that some beneficiaries pay on a portion of their benefits and by interest income that is earned on the Treasury securities held by the Social Security trust funds. In 2021, the Social Security trust funds had receipts totaling $1,088 billion, expenditures totaling $1,145 billion, and accumulated assets (U.S. Treasury securities) totaling almost $2.9 trillion. Over the program’s 87-year history, it has collected roughly $25.2 trillion and paid out $22.3 trillion, leaving asset reserves of almost $2.9 trillion at the end of 2021 in its two trust funds. Projections by the trustees show that, based on the program’s current financing and benefit structure, benefits scheduled under current law can be paid in full and on time until 2035 (under the intermediate set of assumptions). Projections also show that Social Security expenditures are estimated to exceed income by at least 20% over the next 75 years. Restoring long-range trust fund solvency and other policy objectives (such as increasing benefits for certain beneficiaries) have made Social Security reform an issue of ongoing congressional interest.
This report provides an overview of Social Security financing and benefits under current law. Specifically, the report covers the origins and a brief history of the program; Social Security financing and the status of the trust funds; how Social Security benefits are computed; the types of Social Security benefits available to workers and their family members; the basic eligibility requirements for each type of benefit; the scheduled increase in the Social Security retirement age; and the federal income taxation of Social Security benefits.
2) The Social Security Retirement Age
https://crsreports.congress.gov/product/pdf/R/R44670
Summary: The Social Security full retirement age (FRA) is the age at which workers can first claim full (i.e., unreduced) Social Security retired-worker benefits. Among other factors, a worker’s monthly benefit amount is affected by the age at which he or she claims benefits relative to the FRA. Benefit adjustments are made based on the number of months before or after the FRA the worker claims benefits. The adjustments are intended to provide the worker with roughly the same total lifetime benefits, regardless of when he or she claims benefits, based on average life expectancy. Claiming benefits before the FRA results in a permanent reduction in monthly benefits (to take into account the longer expected period of benefit receipt); claiming benefits after the FRA results in a permanent increase in monthly benefits (to take into account the shorter expected period of benefit receipt).
The FRA was 65 at the inception of Social Security in the 1930s. Under legislation enacted in 1983, the FRA increases gradually from 65 to 67 over a 22-year period (for those reaching age 62 between 2000 and 2022). The FRA is 67 for workers born in 1960 or later (i.e., for workers who become eligible for retirement benefits at age 62 in 2022 or later).
Workers can claim reduced retirement benefits as early as age 62 (the early eligibility age). For workers with an FRA of 66, for example, claiming benefits at age 62 results in a 25% reduction in monthly benefits. For workers with an FRA of 67, claiming benefits at age 62 results in a 30% benefit reduction. A majority of retired-worker beneficiaries claim benefits before the FRA. In 2021, when the FRA was 66 and 10 months for workers eligible for Social Security benefits in that year (i.e., those born in 1959), 29% of new retired-worker beneficiaries were age 62; 57% were under the age of 66.
Workers who delay claiming benefits until after the FRA receive a delayed retirement credit, which applies up to the age of 70. For workers with an FRA of 66, for example, claiming benefits at age 70 results in a 32% increase in monthly benefits. For workers with an FRA of 67, claiming benefits at age 70 results in a 24% benefit increase. In 2021, about one-fourth (25%) of new retired-worker beneficiaries were age 66; 18% were over the age of 66.
Some lawmakers have called for increasing the Social Security retirement age in response to the system’s projected financial imbalance, citing gains in life expectancy for the population overall. Other lawmakers, however, express concern that increasing the retirement age would disproportionately affect certain groups within the population, citing differences in life expectancy by socioeconomic groups. Differential gains in life expectancy are important in the context of Social Security because the actuarial adjustments for claiming benefits before or after the full retirement age are based on average life expectancy. Proposals to increase the retirement age are also met with concerns about the resulting hardship for certain workers, such as those in physically demanding occupations, who may be unable to work until older ages and may not qualify for Social Security disability benefits. For an in-depth discussion of potential changes in the Social Security retirement age in the context of life expectancy trends, see CRS Report R44846, The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the Social Security Retirement Age.
