1. Proposal: Social Security BRIDGE1
Introduction
Social Security’s benefits to retirees are paid in the form of an inflation-adjusted annuity.
To preserve the financial integrity of the system, it is important a minimum allowable retirement
age be set to prevent would-be “retirees” from leaving work and claiming benefits at an
unreasonably young age. The retirement age represents an arbitrary barrier to the social
insurance program, and has left millions of elderly Americans caught between unemployment
and retirement. Social Security BRIDGE closes that gap by providing a subsistence level of
income to these involuntarily retired Americans.
The Problem
The Social Security program has done an excellent job in reducing poverty rates among
America’s elderly.2 But the age restrictions on Social Security leave many older Americans
without coverage, and therefore without the social insurance enjoyed by those who have reached
the eligibility age. To understand the impact of this arbitrary age distinction, we can observe
outcomes for populations within several key subgroups. Fig.1 outlines post-WWII
unemployment rates for people below the full Social Security eligibility age and for those above
it. With few exceptions, the unemployment rate for persons below full retirement age has been
historically higher. It is possible to argue that this discrepancy is due to the impact of Social
Security on labor force participation – i.e., when people who are eligible for Social Security
become unemployed, they exercise the option to formally retire and begin collecting benefits.
The impact of this decision can be seen more clearly in Fig. 2, which details the median
duration of unemployment across age groups. The universal trend is for the length of an
unemployment spell to increase with the age of the unemployed person. However, above the age
of 65, the length of the median unemployment spell is decreased relative to the next oldest
group, suggesting that unemployed elderly persons are choosing to withdraw from the labor
force rather than remain unemployed. In other words, they have become involuntarily retired.
1
Bridge Retirement Insurance for the Discouraged Elderly.
2
“Social Security Reduces Elderly Poverty,” The Social Security Network.

2. An additional oddity displayed in the chart is that the median duration of unemployment
for the group aged 55-64 has not increased at the trend rate. This fact suggests that the trend
reversal occurs within this group. To attribute the reversal to retirement decisions made under the
Social Security program, it is necessary to examine more closely the impact of the program on
the marginal subgroups aged 55-61 and 62-64 in addition to the group aged 65 and above. Fig. 3
shows clearly the distinction between the groups aged 55-61 and 62-64. The former is not
eligible for Social Security retirement benefits; the latter may claim them at a reduced rate. The
sharp reduction in unemployment rates observed after this cutoff – between .5% and 1% –
provides further evidence that availability of Social Security for the involuntarily retired leads
them to withdraw from the labor force rather than remain unemployed. But what happens to
those who are not yet eligible for benefits?
Given that the unemployed are generally found at the bottom of the income distribution
in a given group, a closer look at that population segment will reveal the financial consequences
of the Social Security cutoff. Fig. 4 details this impact. Generally, younger groups have higher
income levels at every point in the distribution, which is consistent with their greater earning
power. But below a critical level – 11.5% – older groups tend to have higher income levels. This
discrepancy suggests that Social Security, the primary income program available to older groups
but not younger ones, has significantly raised the living standards of the poorest segment of the
population over age 65, while leaving behind those in the lower age categories. This gap
especially effects the involuntarily retired, who lack sufficient financial resources for retirement.
The Solution
The age of eligibility for Social Security retirement benefits has been on the rise for
several years now.3 Three-quarters of participants, however, choose to retire before they are
eligible for full benefits, and many elect to do so immediately when they become eligible for any
benefits.4 The data suggests that this behavior is especially common among persons who are
unemployed when they reach the age of eligibility for retirement benefits. However, younger
persons do not have this option. Persons aged 55-61 must bear a large financial burden when
they become unemployed, especially given the unique expenses of old age, including increased
3
Peter A. Diamond and Peter R. Orszag, Saving Social Security (2004) 20.
4
Diamond and Orszag 21.
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3. medical costs. Extending a financial lifeline to such people in times of dire need is the
fundamental function of social insurance programs, and the existing framework of Social
Security can bridge the gap between unemployment and retirement for America’s elderly.
Social Security BRIDGE is designed to provide this fundamental financial support to the
involuntarily retired. Under the program, individuals above the age of 55 who meet the following
criteria become eligible for BRIDGE involuntary retirement benefits:
1) Have 35 years or more of work history; that is, no zeroes are figured into the AIME.
2) Have been unemployed and actively seeking work for more than 52 weeks.
Satisfaction of the second criterion is to be determined by the same local entity who would
determine eligibility for unemployment insurance (UI) benefits. If these two conditions are met,
that agency will refer applicants to the Social Security BRIDGE liaison. BRIDGE benefits are
disbursed in a fashion identical to regular Social Security benefits, and they are calculated
according to the same formula as is used for early retirees 5 based on the number of months
before full retirement age the person has entered the Social Security BRIDGE program. The
maximum reduction is capped at the level corresponding to 50% of PIA. The benefit reduction is
then phased out each month so that at the minimum retirement age, it exactly equals the
reduction that would have been incurred by retiring at that age. At this point a BRIDGE
beneficiary is transferred into the general Social Security pool and the benefit rate is fixed.
In order to avoid creating an “unemployment tunnel”6 to retirement as has occurred with
similar programs around the world, the BRIDGE transition occurs independent of UI eligibility.
This means that, in normal times, unemployment benefits will generally have expired well before
BRIDGE benefits become available. This creates a disincentive for workers or firms to pursue
unemployment as a route to government-financed retirement. Additionally, during periods of
economic hardship leading to UI extensions, the BRIDGE program provides significant savings
for general budgets at the state and federal level, as the involuntarily retired no longer depend on
UI for financial support. Instead, their well-being is insured and protected by the BRIDGE
program.
5
“Retirement benefits by year of birth,” Social Security Administration.
6
Tomi Kyyra and Ralf A. Wilke, “Reduction in the Long-Term Unemployment of the Elderly: A Success Story
from Finland Revised” (2006).
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4. Fig. 1 Unemployment Rates Among The Elderly
12-month moving average. Shaded area indicates recessions.
Source: Bureau of Labor Statistics, NBER, author's calculations
8%
55-64
65+
7%
6%
5%
4%
3%
2%
1%
0%
'48 '52 '56 '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08
Fig. 2 Median Duration of Unemployment
Source: Bureau of Labor Statistics
20
18
16 National Average
14
12
Weeks 10
8
6
4
2
0
16-19 20-24 25-34 35-44 45-54 55-64 65+
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5. Fig. 3 Marginal Subgroup Unemployment
Source: Urban Institute
8%
55-61
62-64
7%
6%
5%
4%
3%
2%
1%
0%
Men Women
Fig. 4 Income Distribution in the Lowest Quintile
Source: Social Security Administration, author's calculations
$15,000
$13,000
$11,000
$9,000
Maximum
Income
$7,000
$5,000
51-54
$3,000 62-64
65+
$1,000
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Percent of Population
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