Raising the US retirement age – Would lead to significant cuts in Social Security checks

The shortfall of Social Security has been a heated topic of discussion for a few years now, and many solutions to fix it have been proposed by lawmakers to fix the issue, but still no solutions have been widely accepted and passed.

One of the biggest solutions proposed has been to raise the full retirement age by two years to age 69 in an attempt to extend the life of the program past 2034, but experts disagree on whether or not the solution would be of meaningful help.

The current full retirement age is 67 for those born in 1960 or later, and raising to the proposed 69 years old would mean, according to the Congressional Budget Office (CBO) that individuals would get less money over their lifetime. That is not the only age that would be increased according to the proposal, the earliest age at which a person can claim Social Security would remain 62, but the age at which a person could get the maximum Social Security payment would increase to 72.

This data was released in response to queries by Democratic Rep. Brendan represents Pennsylvania’s 2nd District and is the ranking member of the House committee on the budget, who inquired about the feasibility of the plan.

The CBO explained that, if we continue the current raise of the full retirement age to become 67 years and three months for workers born in 1965 and continues to increase by an additional three months per birth year until it reached age 69 for workers born in 1972, insolvency would still hit at the same time and workers benefits would be reduced at the same rate while at the same time ensuring that they get even less during their lifetime.

According to research, workers born in 1972, claiming Social Security at the earliest possible age of 62 would have their benefits cut by 40%, while now, under the current law, claiming early reduces benefits by 30%. It would not be better for workers born in the 1970s, which is the first decade of born beneficiaries that would be affected by the increase in the full retirement age. For these beneficiaries, the average check would contain 13% less in payments than under current law, and the 1980s workers would follow suit with similar cuts.

What would the change mean for the Social Security coffers?

While in theory the increase in the full retirement age would help curve the expenses in Social Security funds, the math supports the theory, the reality is that gradually raising the full retirement age would not change the current projection that the trust funds that back Social Security would be exhausted in 2034, as any changes to the full retirement age would be implemented by the time the fund is already depleted.

Henry Aaron, senior fellow in the economics studies program at the Brookings Institution, confirms that the change in the full retirement age would affect new Social Security beneficiaries, not existing beneficiaries. If the change is implemented now, beneficiaries in the future would account for just about 5% of total spending, which is not enough to significantly help change the insolvency of the Trust.

Richard Johnson, senior fellow and director of the program on retirement policy at the Urban Institute also concurs with the assessment, especially considering that the change would need to be phased in to fully make it fair to current retirees and those who are on the verge of being eligible for benefits. Changing the full retirement age today and delaying the access to benefits suddenly to a portion of the population would just mean that a portion of workers would feel taken advantage of.

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