Thousands of seniors have raised concerns about the future of Social Security in recent months, citing new ideas, potential payment cuts, and even a possible funding crisis. According to the latest news, a new retirement age is expected to be implemented in the US, so it appears that everything is about to change for seniors.
The proposal under consideration has experts concerned and, if approved, would result in millions of future retirees having to wait an extra year to receive their Social Security payments. It is possible to prevent Social Security from going bankrupt while increasing payroll and income tax revenues through gradual increases in the early retirement age (62), full retirement age (67), and late retirement age (70). These increases would result in longer and more intense work hours.
Changes in the retirement age in the US
Despite being one of the most effective programs in our country, Social Security is facing long-term financial difficulties because its expenditures are growing more quickly than its income. While living longer is generally a good thing, as the baby boomer generation retires over the next 20 years, this trend will result in Social Security facing higher expenses.
Since each generation of pensioners is funded by current workers, who hope to receive their own benefits upon retirement, Social Security is essentially a pay-as-you-go system. The more money Social Security receives in contributions, the more money it needs to provide benefits. Workers in physically demanding occupations and low-wage workers have shorter life expectancies than average, so raising the retirement age could result in disproportionate benefit reductions for them.
For some workers in physically demanding jobs, a certain age may also be out of reach. However, some measures can be taken to counter these effects, such as amendments to disability rules that will help some workers who become unable to perform their jobs after a certain age.
What is the Social Security retirement age?
Congress approved legislation in 1983 that progressively raised the Social Security full-benefit retirement age. Benefits for early retirement would still be available at age 62, but they would be further reduced.
A person who reaches full-benefit age (66 years and 2 months) in 2017 will receive a monthly benefit that grows 8% for each year they wait to receive benefits until age 70, at which point their benefits will be 132% of what they would be at standard retirement age. For those who choose to begin receiving benefits at age 70, the maximum monthly retirement payout in 2017 is $3,538.
Why change it now?
Even though Social Security isn’t facing financial difficulties right now, the program’s expenses are expected to grow faster than its income over the long term. If nothing changes, Social Security’s trust fund will be depleted in less than 20 years, requiring either tax increases, benefit cuts, or a combination of both.
How will this affect me?
Most of the reform ideas are phased in. According to one plan, the FRA could be raised by one month every two years to reflect the increasing life expectancy of Americans. Another plan suggests increasing Social Security benefits gradually but more rapidly to further reduce future spending.
Regardless of how it’s implemented, raising Social Security’s full retirement age makes sense because it would reduce program costs, thereby easing the financial burden on future generations, and also align with Americans’ increasing lifespans.
Will it work for all Americans?
Higher retirement ages may cause disproportionate reductions in benefits for lower-paid workers and those in physically demanding jobs, since these groups have shorter life spans on average.
In addition, some workers in physically demanding jobs may not be able to work after a certain age. Still, there are ways to mitigate these consequences, such as modifying disability rules to help some people who become unable to perform their jobs after a certain age.
Benefits of raising the retirement age
- Social Security’s rising expenses would be controlled, making the program more viable for decades to come. The details of raising the retirement age at the right pace and level will determine how much spending growth is controlled.
- By enjoying a longer period of retirement, older workers will have more time to accumulate their retirement assets. Raising the retirement age makes sense as one component of the answer, given that one reason behind Social Security’s budgetary difficulties is longevity.
- The benefits currently provided to seniors would be extended to future generations, in keeping with the longevity of Americans. The current Social Security benefit formula, which has been in use for more than 30 years and has been successful in balancing the conflicting interests of the many demographic groups receiving Social Security payments, would be maintained that way.
- Future retirees will reduce the burden on the next generation of workers and will receive benefits equal to those of their parents and grandparents. Future pensioners, whose average lifespan is expected to improve, will be able to live longer in retirement than past retirees, as long as the retirement age remains unchanged.
Niamh Prescott has a degree in Mass Communication and an MBA in Finance. She has worked for two media houses and is now running her own media company.
Disclaimer : The content in this article is for educational and informational purposes only.
