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Key Findings Details

Have We Finally Achieved Actuarial Fairness of Social Security Retirement Benefits and Will It Last?
Frank Heiland and Na Yin
WP 2014-307

  • We show that Social Security old age pension benefit adjustments have become significantly closer to actuarially fair across beneficiaries born between 1917 and 1943.
  • For discount rates consistent with long-term average (real) interest rates, we estimate that the current adjustment schedule for workers deviates from its fair form by less than 1% for average-mortality beneficiaries, compared to 5.1% and 4.0% for male and female beneficiaries in 1980.
  • The improvement is largely due to the increases in the Delayed Retirement Credit. For men, gains in life expectancy in conjunction with increases in the Full Retirement Age (FRA) also contributed to the better fit.
  • We predict that the designated increase in the FRA to age 67 will have little effect on the actuarial fit.