Some of the recent news about talks to raise the mandatory retirement age brought unsettled times for many experienced workers. In September, Social Security Administration Commissioner Frank Bisignano was asked whether he’d consider raising the retirement age to protect Social Security, to which he replied, “I think everything’s being considered and will be considered,” as reported by The Hill.
That comment was later walked back, with a Social Security Administration X post claiming that raising the retirement age isn’t under consideration, but it still has many wondering what could happen to retirements if the age were raised.
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Along with working more years, there are several ways such an increased retirement age requirement could impact your retirement savings plan.
If the retirement age were to increase, individuals would possibly need to postpone claiming Social Security benefits.
Doing so would boost monthly benefits over the long term, but it requires adjusting cash flow and short-term savings to cover the gap, per Christopher Stroup, founder and president of Silicon Beach Financial.
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If the retirement age were raised, that would extend the number of working years for most Americans.
Stroup explained that more working years could allow higher contributions to retirement accounts, like 401(k) plans and IRAs. People may increase deferrals to optimize tax-advantaged growth and reduce reliance on Social Security.
Along with more working years, retirement accounts would have more time to grow. This could lead to a change in investment strategy.
“With a longer timeline before retirement, portfolios might tolerate more risk earlier to grow savings, then gradually shift to conservative allocations closer to the new retirement age,” Stroup said.
There could also be changes around healthcare and insurance planning if the retirement age were to go up.
Stroup explained that longer careers may require adjustments in employer-based healthcare, long-term care planning and personal insurance coverage to account for an extended working life.
Mandatory later retirement could also impact decisions about paying off mortgages, funding education or other large expenses to ensure liquidity for later retirement.