A group of Senators is reportedly working on a proposal to raise the full retirement age for Social Security to 70, as well as other changes to how Social Security benefits are financed. The primary objective of doing this is to prevent the program from becoming insolvent in the next decade.
Social security is a safety net for older Americans, thus they need to know how will raising the retirement age affect retirees.
What’s The Need?
As said above, the primary objective of raising the retirement age is to make sure that the Social Security program doesn’t face financial challenges going forward.
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Although there is no danger of the Social Security system going bankrupt, the Trustees of the Social Security and Medicare trust funds estimate that the surplus, which is used to pay for the plans, will go dry in 2035. If this happens, it will automatically result in the reduction of benefits across the board by nearly a quarter.
A major reason why the surplus could run out is the increase in the average life expectancy. As per the data from the Centers for Disease Control and Prevention, the average life expectancy has increased by 5 1/2 years from 1950 to 2016.
Social Security was started in 1935 to provide financial support to older Americans. In 2022, the Social Security benefits were just under 20% of the entire federal budget, or about $1.2 trillion.
Under the current Social Security System, people can start to collect benefits from age 62. However, the benefits they receive will be less than they would have gotten had they waited till the full retirement age to start collecting the benefits. The full retirement age is currently 67 for those born after 1960.
It is not that the Social Security retirement age hasn’t increased over the years, but it hasn’t been able to keep pace with the increase in life expectancy.
In 1983, Reagan signed the Social Security Act Amendment. The retirement age was 65 for those born before 1937, then there was an increase of two months per year for the next five years.
The retirement age was 66 for those born between 1943 and 1954. The retirement age increased by two months per year for those born after 1954 but before 1960. Finally, the retirement froze at 67 for those born in 1960 and later.
So, the retirement age hasn’t been raised for those born since 1960, and this puts a heavy burden on the retirement system, especially Social Security.
Lawmakers, as can be expected, are hesitant to raise taxes or cut Social Security benefits to boost retirement funds. So, the only viable way to save the fund is to increase the retirement age. This way, they would be able to control the outflow from the fund without impacting the incomes of people who depend on the Social Security program.
How Will Raising The Retirement Age Affect Retirees?
According to the experts, the proposed Social Security plan, which includes raising the retirement age, would lead to a benefit cut by lowering the total of Social Security payments collected in a retiree's lifetime.
Moreover, raising the retirement age would also mean that many people could die before reaching the age to collect any Social Security money. The SSA (Social Security Administration) estimates that one in eight of today's 20-year-olds will die before reaching age 67. A similar study from Stanford University found that 20% of people born in 2015 will die before reaching age 70.
Points For And Against
Those in favor of raising the retirement age say it is the least painful option for protecting the Social Security program's future.
They say that slowly raising the retirement age would spare seniors from the sudden shock of a cut in benefits, as well as give young professionals time to change their retirement plans. Supporters of the idea cite the success of a law passed in 1983, which gradually raised the retirement age from 65 to 67.
Opponents argue that raising the retirement age would eventually mean less money in the pockets of seniors. They also argue that raising the age would have more impact on poor Americans, who depend on Social Security as their only source of income.
Opponents also say that the proposal to raise the retirement age is based on a flawed premise that retirement is a matter of choice. In reality, many people are forced to leave the workforce on several grounds, such as health issues.
Will The Retirement Age Really Be Increased?
Many refer to Social Security as the “third rail” of American politics. This is the reason why most politicians try to distance themselves from provisions that negatively impact Medicare and Social Security programs.
Still, many lawmakers have supported budget plans in the past that reduces or at least slows the growth of these programs (Medicare and Social Security). House Speaker Kevin McCarthy, however, has cleared that they’re off the table. Donald Trump also opposed making any cuts to these programs.
Thus, the odds of the bill to raise the retirement age making it through Congress, are considered to be very slim. Despite this, Social Security is set to be a major issue in the 2024 presidential race.
