The Social Security shortfall has been a hotly debated matter for some years, and various remedies have been presented by lawmakers to address the issue, but none have been broadly accepted and passed.
One of the most prominent ideas advocated has been to raise the full retirement age by two years to age 69 in order to extend the program’s duration beyond 2034, however experts vary on whether or not the option would be of any real benefit.
The current full retirement age for people born in 1960 or later is 67, and raising it to the proposed 69 would result in individuals receiving less money over their lifespan, according to the Congressional Budget Office (CBO). According to the idea, the earliest age at which a person can claim Social Security would remain 62, but the maximum Social Security benefit would be raised to 72.
This information was disclosed in response to questions posed by Democratic Representative. Brendan represents Pennsylvania’s 2nd District and serves as the ranking member of the House budget committee, which asked about the plan’s practicality.
The CBO explained that if we continue to raise the full retirement age to 67 years and three months for workers born in 1965, and then increase by three months per birth year until it reaches age 69 for workers born in 1972, insolvency would still occur at the same time, and workers’ benefits would be reduced at the same rate, ensuring that they receive even less during their lifetime.
According to studies, workers born in 1972 who claim Social Security at the earliest feasible age of 62 will have their benefits reduced by 40%, although under existing rules, filing early cuts payments by 30%.
It would not be better for workers born in the 1970s, the first decade of beneficiaries to be affected by the hike in the full retirement age. For these beneficiaries, the typical check would contain 13% fewer benefits than under present law, and 1980s workers would face comparable reductions.
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What would the change mean for the Social Security coffers?
While raising the full retirement age in theory would help curve the expenses in Social Security funds, and 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 support Social Security would be exhausted in 2034, because any changes to the full retirement age would be implemented by the time the fund was already depleted.
According to Henry Aaron, a senior scholar in the Brookings Institution’s economics studies division, the adjustment in the full retirement age will only affect new Social Security beneficiaries. If the reform is adopted now, beneficiaries in the future will account for only around 5% of total spending, which is insufficient to considerably improve the Trust’s bankruptcy.
Richard Johnson, senior fellow and director of the Urban Institute’s retirement policy program, agrees with the assessment, especially given that the change would need to be phased in to ensure fairness to current retirees and those on the verge of eligibility for benefits. Changing the whole retirement age today and abruptly delaying access to benefits for a part of the population will only make some people feel taken advantage of.