Raising Retirement Age Would Cut Social Security Advantages

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Raising the retirement age for Social Security even by only a yr or two would end in significant reductions in payments for many Americans, a latest evaluation shows.

Under the present Social Security system, the total retirement age is 67, but people can claim advantages as early as age 62 or as late as age 70. In case you wait to gather Social Security, your monthly payments will likely be larger: Claiming at 62 means a 30% penalty, and waiting until 70 means a 24% bonus.

A latest evaluation by the Center for American Progress, a left-leaning think tank, finds that changing the total retirement age from 67 to 69 “would cut advantages by hundreds of dollars per yr for a population that has not shown significant interest in delaying retirement.”

Proposal to boost retirement age for Social Security

House Republicans have proposed changing the retirement age to shore up the Social Security program, which faces a looming funding shortfall.

A budget proposal from the Republican Study Committee would make “modest adjustments to the retirement age for future retirees to account for increases in life expectancy.”

While the small print of the proposal are sparse, any change to the retirement age would likely have major financial implications for many Americans who will likely be eligible to assert Social Security advantages after they’re older.

For now, changing the retirement age is merely a proposal — and it doesn’t have the support of former President Donald Trump. It is also necessary to notice that if lawmakers were to pass such a change down the road, Americans who’ve already retired and claimed advantages wouldn’t be affected. (Roughly 70 million people receive Social Security, including older adults and folks with disabilities.)

But even a gradual increase within the retirement age would likely be met with major backlash from the general public, as this system is very popular and a significant a part of most individuals’s retirement planning.

Other proposals to handle Social Security’s funding issues like increasing taxes would surely be controversial as well.

With out a legislative solution, Social Security trust fund reserves are on the right track to be depleted just over a decade from now. At that time, only 83% of advantages can be paid to recipients.

How raising the retirement age would affect Social Security

If the retirement age is pushed back, Americans would face more severe penalties for claiming Social Security at earlier ages, the Center for American Progress says.

Those claiming advantages at age 62 could face a 39% penalty as a substitute of the present 30% maximum penalty. That might end in an almost 13% reduction in advantages.

“The median-wage retiree turning 62 in 2034 would have their monthly profit cut between $345 and $741, depending on the age at which they claimed advantages,” based on the evaluation. “After only one yr, they might lose between $4,140 and $8,892.”

Waiting until age 70 to assert Social Security would only net Americans an 8% bump, versus the present 24% increase in monthly payments you get for waiting three years after the total retirement age.