Social Security full retirement age shouldn't go higher, experts say

Social Security full retirement age shouldn’t go higher, experts say

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More than a million people recently took to the streets in France to protest against a raise at the normal retirement age in the country.

In the United States, a similar battle could be quietly brewing in washington.

THE full retirement age Social Security, when workers are eligible for 100% of the benefits they have earned, increases to age 67. Eligibility for health care coverage under Medicare currently starting at age 65.

Yet, as both programs face funding shortfalls, a republican proposal suggested pushing those ages higher.

The Republican Review Committee budget, introduced by House leaders, called for the full Social Security retirement age to be gradually rise until it is increased by three years. Under their proposal, people born in 1978 or later would have a full retirement age of 70.

The proposed changes would not apply to current Social Security recipients or those age 55 and older, according to plan which was proposed last year.

The Republicans also propose raising the age of eligibility for health insurance coincide with the full social security retirement age, then index this age to life expectancy.

During the State of the Union address this week, President Joe Biden called democrats and republicans stand up to show Americans that they will not cut Social Security or Medicare.

Despite the moment of unanimity, experts say Republicans’ proposal represents cuts.

“Social Security is a very simple problem: it’s money coming in and money going out as benefits,” said Alicia Munnell, director of Boston College’s Center for Retirement Research.

“There are two ways to fix it: you can take less money out or you can take in more,” Munnell said.

Crucially, there is no third way, Munnell said, as some have suggested raising the retirement age.

“Raising the retirement age is a reduction in benefits,” Munnell said.

Higher retirement age ‘doesn’t work for this economy’

Social Security riders signed in 1983 inaugurated today the gradual transition to full retirement age at 67.

THE initial eligibility age for retirement benefits is still 62. However, as the age of full retirement increases, those who apply at this earliest age face greater benefit cuts.

The 1983 legislation brought about other notable changes, such as subjecting part of the benefits to income tax, as well as granting deferred retirement bonuses 8% per year for those waiting to be eligible after full retirement age up to age 70.

The 1983 changes came as the program faced insolvency. Today, the program faces a similar dilemma. Just 80% of profits will be payable from the combined trust funds in 2035, unless changes are made sooner, according to Social Security Administration projections.

This led to suggestions to raise the retirement age again.

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But raising the retirement age the first time around was a “big miss”, according to Teresa Ghilarducci, a labor economist and professor at The New School.

In 1983, the adoption of 401(k) plans had just begun and it was hoped that these accounts could replace defined benefit plans and cover half of the workforce not covered by a pension plan.

“This experiment was a big failure,” Ghilarducci said. “And that hope was misplaced.”

Today, the number of workers who do not have access to a workplace retirement savings plan is still stubbornly high.

Unlike 1983, when old-age poverty rates were falling, they are now rising, Ghilarducci noted.

“They’re coming up with a 40-year-old plan that’s not working for this economy,” Ghilarducci said.

The myth of working longer

40 years ago, people were expected to live longer and be healthier, giving them the opportunity to choose to work longer.

Certain developments, in particular the elimination of the mandatory retirement age and the creation of new anti-discrimination rules based on age, have contributed to this prospect, noted Ghilarducci.

However, data now shows that not everyone has the privilege of working longer.

College-educated white workers can likely work into their 70s, according to Munnell. But other bands don’t have the same luxury.

“Less-educated groups and racial minorities just don’t have as many years of healthy life expectancy as they could,” Munnell said. “So it’s really discriminatory.”

Raising the retirement age again can only exacerbate these differences. “I think that’s about as far as you can go,” Munnell said of the full retirement age of 67 that is being phased in.

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There’s another reason why raising the retirement age again wouldn’t work – living longer and being able to work longer are not the same things, according to Ghilarducci.

Evidence shows that raising the retirement age has not necessarily changed when people apply for Social Security benefits.

“Most people who apply for Social Security early are actually still in the workforce,” Ghilarducci said. “But they are claiming Social Security early on at a very low rate to supplement the low wages.”

This becomes a problem when they are no longer working and their benefit check is not enough to cover their needs.

“This may explain one reason why old-age poverty rates are rising, because most people depend on Social Security for most of their retirement income,” Ghilarducci said.

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