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<title>Statement of Virginia P. Reno, Deputy Commissioner for Retirement and Disability Policy, before the Senate Special Committee on Aging</title>
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<p align="center"><strong>Statement of Virginia P. Reno,<br>Deputy Commissioner for Retirement and Disability Policy, <br>Social Security Administration<br>before the Senate Special Committee on Aging<br>
</strong></p>
<p align="center"><strong> September 14, 2016<br><br>
</strong></p>
<p>Chairman Collins, Ranking Member McCaskill, and Members of the Special Committee:</p>
<p>I am Virginia Reno, Deputy Commissioner for Retirement and Disability Policy at the Social Security
Administration (SSA). Thank you for inviting me to discuss how SSA provides information to help
workers and their family members decide when to claim Social Security retirement benefits. This
decision is a very important one, and we are mindful of our responsibility to provide information
to help our claimants make informed decisions that best fit their individual circumstances.</p>
<p><u><strong>Importance of Social Security</strong></u></p>
<p>First, I would like to note the importance of Social Security, officially named the Old- Age,
Survivors, and Disability Insurance program. Few government agencies touch as many people as we do.
We are with people through life’s journey, helping them secure today and tomorrow. Social Security
is a social insurance program, under which workers earn coverage for retirement, survivors, and
disability benefits by working and paying Social Security taxes on their earnings. Employees today
contribute 6.2 percent of their earnings – on earnings up to $118,500 a year – for Social Security
protection, and their employers contribute matching amounts. Self-employed workers contribute both
the employee and employer shares and receive tax deductions for the amount of the employer share.
In 2015, 213 million workers were insured for retirement and survivors benefits, and 151 million
workers were protected against a catastrophic loss of income due to disability.</p>
<p>Social Security pays monthly benefits to 60 million individuals, including 40 million retired
workers and three million of their spouses and children; nine million disabled workers and two
million dependents (mainly children); and six million surviving widows, children, and other
dependents of deceased workers.<strong><tt>1</tt></strong> In fiscal year (FY) 2015, these benefits totaled around $877
billion. Administrative expenses for Social Security are very low, less than one percent of benefit
payments.</p>
<p>Social Security is the foundation of retirement security for almost all U.S. workers, and it is the
main source of income for most retirees. Nearly two in three seniors who receive Social Security
get more than half of their total income from it, including one in three who rely on their benefits
for all or almost all (90 percent or more) of their income.<strong><tt>2</tt></strong></p>
<p><br>
<u><strong>Choosing When to Claim Retirement Benefits</strong></u><strong></strong></p>
<p> Choosing when to start receiving Social Security retirement benefits is an important decision that
affects the amount that individuals receive for the rest of their lives.
Workers can claim full (unreduced) retirement benefits at their full retirement age (FRA)
– currently age 66.<tt><strong>3</strong></tt> Social Security offers workers flexibility to claim benefits as early as age
62 or to delay as late as age 70.</p>
<p>Receiving Social Security benefits before FRA permanently reduces an individual’s monthly
retirement benefit for every month of benefits received before attaining FRA – and the earlier
benefits begin, the greater the reduction.<tt><strong>4</strong></tt> In 2016, retirement benefits claimed at age 62 result
in a reduction of up to 25 percent, compared to the benefit payable at FRA.<tt><strong>5</strong></tt></p>
<p>On the other hand, individuals who delay claiming beyond FRA earn “delayed retirement credits”
(DRCs) for every month they do not receive benefits after attaining FRA and prior to attaining age
70. For those born in 1943 and later, each month of delay increases the retirement benefit by
two-thirds of one percent, or eight percent per year.</p>
<p>For example, consider an individual eligible for a $1,000 monthly benefit at the FRA of
66. As shown in the following chart, if he or she took benefits at age 62, the monthly amount would
be permanently reduced by 25 percent to $750. On the other hand, if he or she delayed benefits
until age 70, the monthly amount would be permanently increased by 32 percent (eight percent per
year from age 66 to 70) to $1,320. Overall, delaying the start of benefits from age 62 to 70 would
increase the monthly benefit by 76 percent (from $750 to $1,320).<tt><strong>6</strong></tt><strong></strong></p>
<p></p>
<p align="center"><img src="testimony_091416a.jpg" width="704" height="574" alt="Recipient Age / Monthly Benefit Chart"></p>
<p><br>
Retirement claiming decisions can also affect the amount of the benefit that the worker’s
surviving spouse will receive, if he or she outlives the worker. In effect, the same adjustment
that applies to the worker’s retirement benefit will apply to survivor benefits paid to the
worker’s widow or widower, for the rest of his or her life.</p>
<p>The amount of these reductions and credits is not arbitrary. Rather, the benefit adjustments for
early and delayed claiming are designed to be actuarially neutral in the cost to the Social
Security trust funds. This means that, no matter when he or she elects to receive retirement
benefits, if an individual lives to the average life expectancy, he or she will receive roughly the
same lifetime benefits. Of course, real people are not averages.
In this respect, people make decisions that best reflect their own situations and needs.</p>
<p>Deciding when to claim retirement benefits can be complex and is a highly personal decision, based
on many factors. In addition to the monthly benefit amount, individuals will want to consider their
personal and family circumstances, including current and future financial resources and
obligations, and current and anticipated health and
longevity.
</p>
<p> Someone who needs benefits at age 62 to make ends meet, or whose current health is
precarious, may choose to claim benefits at age 62. Others may choose to wait until age 70 to get
higher Social Security benefits in case they might live to an advanced age when other resources may
have decreased. In fact, the likelihood of living to an advanced age is greater than many people
might realize. Social Security’s actuaries estimate that more than one in three 65-year-olds today
will live to age 90, and more than one in seven will live to age 95.<strong><tt>9</tt></strong><tt></tt></p>
<p>Married couples approaching retirement have two lives to plan for. They must consider important
information about Social Security protection for widowed spouses. A higher- earning partner who
delays benefits will receive higher monthly benefits for his or her life. This delay will also
result in higher survivor’s benefits for a spouse if the spouse lives longer. Married couples at
age 65 today have greater than a 50-50 chance that at least one member of the couple will live
beyond the age of 90.<tt><strong>10</strong></tt><strong></strong></p>
<p><strong><u>Social Security’s Role in Individuals’ Decision-Making</u></strong></p>
<p>SSA’s role in the retirement claiming decision is to provide objective and clear information that
individuals can use to make an informed decision for their own circumstances. The Government
Accountability Office (GAO) is currently exploring the ways we inform individuals about their
choices. While our outreach, education, and customer service efforts are informative and robust, we
appreciate the guidance and recommendations that GAO may offer to improve our interactions with the
public.</p>
<p>We have a variety of ways to inform individuals about their claiming decisions before they decide
to file for benefits. These resources are critical because they allow individuals to gather
information and consider their decisions in advance, so they have time to think about the best
claiming age for them. After all, by the time they arrive in a field office or complete an online
application to claim benefits, they may have already decided to file for benefits. We provide this
information in advance through the Social Security Statement, our website and publications,
outreach, and more.</p>
<p><strong><em>Social Security Statement</em></strong></p>
<p>The <em>Social Security Statement (Statement)</em> reaches a wide swath of workers and pre- retirees of all
ages. It often serves as our first interaction with members of the public. We currently mail
Statements to workers ages 25, 30, 35, 40, 45, 50, 55, and 60 or older who
are not receiving Social Security benefits and do not have a <em><span class="my">my</span></em> <span class="blue">Social Security</span> account.<strong><tt>11</tt></strong> In FY 2015, we mailed more than 44 million <em>Statements</em>.</p>
<p>The most convenient way for people to see their <em>Statement</em> is by creating and using their personal
<span class="red">my</span> <span class="blue">Social Security</span> account through our <a href="http://www.socialsecurity.gov/" target="_blank">SocialSecurity.gov</a> website. However, we also provide an
option for online users to print and mail a request to us, allowing us to send a hard copy
<em>Statement</em> without any registration process.</p>
<p>The <em>Statement</em> provides personalized information about an individual’s potential retirement,
disability, and survivor benefits, as well as a detailed record of the individual’s earnings
history. We encourage people to verify their earnings history and let us know if corrections are
needed. This is especially important since we base future benefits on the individual’s earnings
history. For retirement benefits, the Statement lists the benefit amounts that he or she could
expect to receive at age 62, at FRA, and at age
70. For people age 55 and older, the <em>Statement</em> describes additional factors to consider when
choosing when to claim benefits. It includes information on how work affects benefits; how a
worker’s claiming decision affects his or her spouse’s survivor benefits; how to avoid a Medicare
late-enrollment penalty; and information on life expectancy. Surveys indicate that receiving the
<em>Statement </em>increases Social Security program knowledge among recipients,<tt><strong>12</strong></tt> and preliminary research
findings suggest that <em>Statement</em> receipt also has a statistically significant impact on claiming
decisions, reducing the percentage of individuals claiming at ages 62 and 63.<tt><strong>13</strong></tt></p>
<p>Because it reaches so many people and provides individualized benefit information, the <em>Social
Security Statement</em> is a valuable educational tool. With recent funding levels, however, we have
been unable to mail Statements to all workers in some years. As the <em>Statement</em> serves as a vital
tool in retirement planning, it is essential that we receive the funding necessary to ensure that
we are able to continue its mailing.</p>
<p><strong><em>Publications and Online Tools</em></strong></p>
<p>We offer a wealth of information to the public through our publications, website, and other online
tools. Over 118 million people visited our website a total of more than 216 million times in the
last year. Numerous publications, webpages, and <a href="http://faq.ssa.gov/" target="_blank">Frequently Asked Questions</a> explain the effect that
earnings, the age of claiming benefits, and the receipt of a non-covered pension may have on Social
Security benefits. Our resources range from providing basic information about benefits, to delving into the details of benefit
calculations, factors to consider in claiming decisions, and more.</p>
<p>We offer a variety of online calculators. One of these, <a href="https://www.ssa.gov/retire/estimator.html" target="_blank">the Retirement Estimator</a>, allows an
individual to input a few pieces of personal information and receive an estimate of benefits that
would be payable if he or she were to claim benefits at age 62, at FRA, at age 70, or at any age in
between based upon his or her actual earnings information. The Retirement Estimator lets
individuals enter different future earnings information, retirement dates, and scenarios to help
decide the best time to retire. We also offer a <a href="https://www.ssa.gov/OACT/population/longevity.html" target="_blank">Life Expectancy Calculator</a> to aid people with
their retirement planning. This calculator allows an individual to see his or her estimated total
life expectancy based on his or her gender and date of birth.</p>
<p>Individuals with a <em><span class="red">my</span></em> <span class="blue">Social Security</span> account gain immediate access to their Statement online,
including both their earnings record and their expected Social Security benefits were the
individual to claim benefits at ages 62, FRA, and 70. Currently, over 26 million individuals have
signed up for a <em><span class="my">my</span></em> <span class="blue">Social Security</span> account.</p>
<p>We also offer substantial information while an individual completes the online application for
retirement benefits. Throughout the online retirement application, we provide links that explain
why we ask for particular pieces of information or that offer information based on a claimant’s
individual circumstances. For example, within the online application, when claimants indicate the
date they want to start receiving benefits, we provide information to let them know that if they
begin receiving their benefit before FRA, their benefits will be permanently reduced. We also
provide links to more information about FRA and full benefit amounts. Additionally, we provide a
link to a retirement estimator, mentioned earlier, that allows claimants to see what their benefit
amount would be at various ages. This level of information is important because most retirement
claims are filed online – in 2015, 52 percent of retirement applications were filed online.</p>
<p><strong><em>Direct Service to Customers</em></strong></p>
<p>Our employees are dedicated to providing customers with all the information they need to make a
well-informed decision about claiming Social Security benefits. They assist the public in a variety
of ways, through face-to-face interaction in the field offices, by telephone, in response to online
applications, and by mail.</p>
<p>Employees inform claimants of all benefits for which they and their family members may be eligible;
provide monthly benefit amounts at early, full, and delayed retirement ages; and discuss other
information the claimant may need to know about Social Security rules, requirements, and benefits.
In short, our employees provide customers with information about Social Security and how our rules
apply to each customer’s individualized
situation. At the same time, we instruct our employees not to persuade or influence
claimants about benefit decisions. Rather, our information about Social Security benefits
and rules is part of a much larger picture that a claimant and his or her family must put together
to make decisions that fit their own circumstances. Our employees are not in a position to know
about or discuss a worker’s financial resources, tax situation, health, family history, or other
information that may be important when making individual retirement decisions.</p>
<p><strong><u>Ending Use of Breakeven Analysis</u></strong></p>
<p>In the past, we used to calculate a “breakeven age” for claimants who were deciding when to claim
benefits.<tt><strong>14</strong></tt> We discontinued this practice in 2008 based on concerns within the agency, from
stakeholders, and from researchers that its use encouraged early benefit claiming. Breakeven
analysis generally weights the discussion toward getting the most money as soon as possible (often
by claiming early), and may undervalue Social Security’s annuity protection against the so-called
“longevity risk”– the very real risk that an individual or his or her surviving spouse may face
deprivation at an advanced age.
Based on these concerns, we discontinued using the breakeven concept in 2008. Subsequent research
supports this decision. For example, a 2011 study tested different ways of framing or presenting
information on Social Security claiming options, and found that use of breakeven framing led to
substantially earlier expected claiming dates than other ways of presenting the same information.<tt><strong>15</strong></tt> Additionally, more recent research finds that psychological factors, such as loss aversion and
preference for immediate over future rewards, could also encourage earlier claiming of benefits.<tt><strong>16</strong></tt></p>
<p><strong><em>Field Office Employee Training</em></strong></p>
<p>Our field office employees serve as the face of our agency, providing integral in-person
decision-making information to our claimants. To ensure that they are well informed and able to
provide exemplary customer service to the public, we train our field office claim specialists
through a variety of methods and over the course of their careers. Claims specialists’ training
begins with approximately four months of formal entry-level and advanced training. This training
covers topics that employees need to perform their jobs, and explains how employees should discuss
items with claimants during interviews and
in response to questions.<br>
</p>
<p>After formal training, claims specialists enter into a mentorship under a journeyman
employee until they have shown their proficiency in their job duties. To ensure that our employees
retain their knowledge and are aware of any updates to policy and procedure, we offer continued
training even after an employee has been certified to complete work independently, and such
training continues throughout his or her career.</p>
<p> <em><strong>Collaboration</strong></em><strong></strong></p>
<p> Public outreach is an essential part of our strategy to educate the public on the retirement
benefit options available. We provide the public with critical information about our programs,
benefits, and services. To this end, we participate in ongoing communications and collaborations
with key national organizations, advocacy groups, Federal agencies, and state and local government
organizations.</p>
<p>We collaborate with a number of outside organizations on research and other projects to expand our
understanding of retirement claiming decisions and related factors, and to improve how we explain
this information to the public. For example, we are working with the White House Social and
Behavioral Sciences Team to use insights from the behavioral sciences to improve how we explain
options that individuals have about the retirement earnings test and claiming options. We are also
partnering with AARP to explore messaging about claiming ages (such as at full retirement and early
retirement). In addition, we support a nationally-representative panel survey that allows us to
determine what participants know about Social Security, how they want to receive information from
us, and how well they understand particular messages or terminology about retirement claiming.</p>
<p>We also work with other Federal agencies to provide people with the information tools they need to
plan for retirement and to encourage financial readiness. For example, we partnered with the
Department of Labor to develop and publicize the Retirement Toolkit. This toolkit includes
information on Social Security benefits and claiming, Medicare, retirement savings, and other
related topics. We also recently co-hosted a public Financial Security Research Symposium with the
Department of the Treasury, as part of the Financial Literacy and Education Commission.</p>
<p>These collaborations, and others like them, further our understanding of how best to explain
complicated claiming information in a way that promotes informed decision- making for all of our
claimants. We are using empirical evidence to improve tools and techniques to help our customers
make informed decisions about claiming Social Security retirement benefits.</p>
<p> <u><strong>Funding</strong></u><strong></strong></p>
<p> Finally, I would like to emphasize our need for adequate, sustained funding to carry out
Social Security’s core missions, including our commitment to provide the world-class
service that this Committee, the GAO, and our public expect. When workers contribute
6.2 percent of their earnings throughout their working lives into the Social Security program, they
are paying not only for insurance protection and a monthly insurance benefit. They are also paying
for the comprehensive service they expect from us before and when they claim benefits.</p>
<p>However, our operating budget (excluding dedicated program integrity funds) to administer Social
Security has been severely constrained in recent years. SSA’s core operating budget has shrunk by
10 percent since 2010 after adjusting for inflation, even as the number of Social Security
beneficiaries has risen by 12 percent over the same time. We expect to serve a record number of
claimants and beneficiaries in FY 2017.
And large numbers of claimants and beneficiaries continue to come to us expecting the services that
they paid for throughout their working lives. We do not expect this to subside in the foreseeable
future, as the first boomers reached age 62 only in 2008 (and the last ones will not reach that age
until the mid-2020s).</p>
<p>But we can only do so much when we receive far less money than we need, even as our workloads are
increasing with the baby boomers reaching retirement age. Our FY 2016 enacted budget was $350
million less than the President’s request. Given the significant demand for our services and the
budget constraints of recent years, the result has been that more people are waiting to be served
at field offices, more people are waiting longer for their claims to be allowed, and more people
(over one million) are waiting for their hearings before administrative law judges.</p>
<p>We are greatly concerned about FY 2017 under a continuing resolution or even lower funding levels.
Each year we must absorb $300-350 million inflationary growth in our fixed costs (e.g., payroll,
benefits, rent, postage, and guard services), which means less money to do our work and serve the
public. We already are faced with a hiring freeze, which means – due to attrition – we are
shrinking even as the number of Social Security beneficiaries grows. The House appropriations
bill, if enacted, would cut the agency’s base administrative funding below the FY 2016 enacted
level and result in serious degradation of service. For example, at such low funding levels, we
could face up to two weeks of employee furloughs, when our field offices could be closed to the
public. The Senate appropriation bill, while higher than the House bill, would still fall short of
providing us the funding to serve record numbers of claimants and beneficiaries.</p>
<p>The President’s Budget request of $13.067 billion would provide funding to improve service to the
public, and it would allow us to continue mailing <em>Social Security</em> <em>Statements</em> to millions of
workers. We have demonstrated that we do an excellent job managing our administrative budget
despite needing a large infrastructure that requires many people and buildings to be accessible to
the public. Our administrative costs are extremely low considering the volume of work we do. In
2015, administrative expenses represented only 0.7 percent of total Old-Age and Survivors Insurance
(OASI) and
Disability Insurance (DI) benefits. Looking at OASI alone, the numbers are even lower,
at 0.4 percent of OASI outgo. Again, that is <em>less than one-half of one percent</em> – far less
than any private sector system for providing life insurance and retirement annuities.</p>
<p>As GAO and many others point out, decisions about claiming retirement benefits have lifelong
consequences for retirees and their spouses. It is crucial that we get a funding level that allows
us to rebound from this year’s constraints to restore and improve service to the public. We
reiterate the critical importance of adequately funding our agency so that we can deliver the level
of service the American people deserve and have paid for with Social Security contributions from
their paychecks throughout their working lives. </p>
<p><strong><u>Conclusion </u></strong></p>
<p>When Congress enacted the Social Security Act in 1935, it did so to provide seniors with
benefits based on their earned income to sustain them through their retirement. This continues to
be one of the program’s core purposes. But our efforts should not result in pushing our claimants
into a one-size-fits-all choice. Our program rules allow individuals to claim their retirement
benefits at any time between the ages of 62 and 70, offering individuals the flexibility to start
benefits at the date that best suits their needs. Through interaction with agency employees, the
<em>Social Security Statement</em>, <em><span class="my">my</span></em> <span class="blue">Social Security</span>, and other online tools, our publications, and our
outreach efforts, we provide valuable ways for individuals to learn about how claiming decisions
may affect their benefits.
While there is no “best age” for all individuals to receive their retirement benefits, we design
our efforts to ensure that individuals can make informed decisions based on their own
circumstances. </p>
<p>Thank you again for inviting me here today. I would be glad to answer any questions.<br>
</p>
<p><strong>________________________________________________________________________</strong></p>
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<p><strong>1</strong> We also administer the Supplemental Security Income program, which provided benefits to over eight million recipients last year.</p>
<p><strong>2</strong> <a href="https://www.ssa.gov/policy/docs/statcomps/income_pop55/2014/sect09.html" target="_blank"><em>Income of the Population 55 or Older</em>, 2014 (2016), Table 9.A1</a></p>
<p><strong>3</strong> For persons born in years 1943 through 1954, full retirement age is 66. Over time, the full retirement age will gradually increase to age 67 (for persons born in 1960 and later).</p>
<p><strong>4</strong> In the case of early retirement, a benefit is reduced 5/9 of one percent for each month before full retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.</p>
<p><strong>5</strong> For persons born in 1960 or later, a worker who chooses to retire at age 62 would have a reduction of up to 30 percent.</p>
<p><strong>6</strong> Both figures reflect current dollar amounts. Because all beneficiaries receive cost-of-living adjustments over time, regardless of when they elect to begin retirement benefits, the actual dollar amounts would vary.</p>
<p><strong>7</strong> See SSA Pub. No. 05-10147, “<a href="https://www.ssa.gov/pubs/EN-05-10147.pdf" target="_blank">When to Start Receiving Retirement Benefits</a>” (July 2016), available at <a href="https://www.ssa.gov/pubs/EN-05-10147.pdf" target="_blank">https://www.ssa.gov/pubs/EN-05-10147.pdf</a>.</p>
<p><strong>8</strong> These monthly benefit amounts do not account for any benefit increase that may be due to earnings after age 61.</p>
<p><strong>9</strong> See SSA Pub. No. 05-10147, “<a href="https://www.ssa.gov/pubs/EN-05-10147.pdf" target="_blank">When to Start Receiving Retirement Benefits</a>” (July 2016), available at <a href="https://www.ssa.gov/pubs/EN-05-10147.pdf" target="_blank">https://www.ssa.gov/pubs/EN-05-10147.pdf</a>.
<p> <strong>10</strong> NASI brief, When Should I Take Social Security Benefits? 2014, data based on OACT estimates for 2013.</p>
<p><strong>11</strong> Individuals also may request a copy of their <em>Statement</em> outside of these times.</p>
<p><strong>12</strong> Barbara Smith and Kenneth Couch, “<a href="https://www.ssa.gov/policy/docs/ssb/v74n2/v74n2p1.html" target="_blank">The Social Security Statement: Background, Implementation, and
Recent Developments</a>,” in <em>Social Security Bulletin</em>, Vol. 74, No. 2, 2014.</p>
<p><strong>13</strong> Barbara Smith and Kenneth Couch, “The Contribution of the Social Security Statement to the
Retirement Security of American Workers,” paper presented at the Financial Security Research<br>
Symposium, U.S. Treasury Department, Washington, DC, September 7, 2016.</p>
<p><strong>14</strong> The breakeven point is the age at which the projected amount of accumulated benefits based on a later
retirement (higher monthly benefits) would equal the projected amount of accumulated benefits from
retiring early (reduced monthly benefits).</p>
<p><strong>15</strong> Jeffrey R. Brown, Arie Kapteyn, and Olivia S. Mitchell. <a href="http://www.rand.org/content/dam/rand/pubs/working_papers/2011/RAND_WR854.pdf" target="_blank">Framing Effects and Expected Social Security
Claiming Behavior</a>. RAND Working Paper WR-854, April 2011.</p>
<p><strong>16</strong> Shu, Suzanne B., John W. Payne, and Namika Sagara. 2014. The Psychology of SSA Claiming
Decisions: Toward the Understanding and Design of Interventions. Prepared for the 16th Annual Joint
Meeting of the Retirement Research Consortium, August 7-8, 2014.</p>
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