Restoring the early retirement age to 65 would have little effect on Social Security’s solvency, because benefits increase when retirement is delayed. The trust fund’s solvency would be extended for only a few years, meaning that other steps would be necessary to preserve it.
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But raising the early retirement age would prevent lower benefits due to early retirement, raising average monthly checks significantly. Private pension benefits also would be higher — by about 15% — because retirees would have been paying in for longer and have fewer retirement years to finance. In a recent paper for the American Enterprise Institute, I analyzed the numbers and concluded that average annual incomes for future retirees would rise by about $7,500 if the retirement age was returned to 65.
Increasing the retirement age also would help the economy and the federal budget. The nation’s annual GDP would increase by hundreds of billions of dollars. Those extra dollars would be taxed, resulting in higher tax revenues to fund the federal budget. The additional revenue would reduce the federal budget deficit by several times more money annually than does the recent healthcare reform.