In the last few months, the Social Security Administration has announced several changes to its retirement, disability, and Supplemental Security Income (SSI) benefit programs. Understanding potential changes that might compromise your Social Security benefits is relevant to planning your finances and preparing for any possible problems you may find. In this case, Rachel Greszler, a senior research fellow at the Roe Institute, wants to introduce a new proposal intended to raise the full retirement age to 70, which, if effective, could impact millions of future retired workers who will need to wait more years to receive their monthly Social Security benefits.
The full retirement age (FRA) in the United States, often known as the “normal retirement age,” is the age at which you can receive full Social Security payments. This age fluctuates according to birth date and eventually rises as life expectancy grows. Early retirement begins before the full retirement age, with the youngest age of 62 and the full retirement age for individuals born after 1960 being 67. According to Greszler’s article for the right-wing Heritage Foundation, the normal eligibility age for collecting Social Security benefits should be raised to 70 to help address the impending funding cliff, which currently faces the SSA.
Raising the full retirement age will significantly impact Social Security benefits
Congress must act to guarantee the solvency of the trust funds that support the nation’s largest benefit system for retirees, survivors, and disabled individuals; otherwise, they would run out of money in 2035, according to the SSA’s 2023 Trustees Report, which was published earlier this year. In addition, Greszler recently wrote that in order to restore Social Security’s purpose, policymakers should gradually raise the traditional retirement age from 67 to 69 or 70, increasing the age by about one or two months a year and indexing it to life expectancy.
Moreover, Greszler argued that the US is seeing a reduction in the SSA’s impending deficit because of longer life expectancies, better healthcare, and a move away from physically demanding jobs. Beyond Social Security’s financial stability and the extra money that Americans would make, there are further advantages to older individuals continuing in labor. Younger employees benefit greatly from the knowledge and expertise of more seasoned employees, as well as their mentorship. Furthermore, older workers now have more options in the labor market to gradually transition into retirement rather than ending their employment suddenly.
Inflation adjustments should also be considered in Social Security benefits
Greszler pointed out that raising the retirement age is not the only pathway to helping with the 2035 shortfall crisis. She said inflation adjustments would be necessary. While updating the Social Security retirement age is an important component of reforming the program, it would only address about 20 to 30 percent of the program’s shortfalls. Another 20 to 25 percent of the program’s shortfall could be eliminated by a more accurate inflation adjustment.
On the other hand, Stephen Kates, principal financial analyst for RetireGuide.com, told Newsweek that raising the age at which people can claim benefits is a backward way of simplifying and reducing Social Security benefits. Likewise, he highlighted that, when compared to the projected benefits at full retirement age, which is 67 for those born after 1959, the earliest age at which an individual can begin to receive benefits is 62.
This often translates into an approximately 30 percent fall in monthly income. Future retirees would receive fewer Social Security benefits and a later start date if the earliest or full retirement age were raised. Lastly, according to the Center on Budget and Policy Priorities (CBPP), if politicians do nothing, raising the Social Security retirement age will reduce payments by roughly the same amount as what is anticipated to happen in the 2030s.