Problems with the Social Security program are well-known, with funding shortfalls expected to cut benefits as much as 25% by 2034 unless Congress acts to provide a fix. One possibility is raising the retirement age above 67 – a move some financial experts say is a definite possibility.
Changing the retirement age doesn’t happen very often. The last time it happened was in 1983 when the full retirement age was raised to 67 from 65. Those changes are still being phased in today, CNBC reported, meaning your full retirement age could be 66 or 67, depending on when you were born.
A survey from Natixis Investment Managers found that most people hope to retire at 62, the earliest possible age to collect Social Security retirement benefits. The longer you wait to collect them, however, the more benefits you receive.
Congress would need to approve any changes to the retirement age. That’s not something under consideration right now, though the U.S. House did approve a retirement bill last week that would raise the age for required minimum distributions (RMDs) on certain savings accounts to 75 years old from 72 currently. If the bill passes the Senate, the change would be gradually phased in by 2032.
Raising the retirement age is trickier because most Americans aren’t crazy about the idea, experts say.
“It has and will continue to be the third rail of politics because of the public sensitivity around the issue,” Shai Akabas, director of economic policy at the Bipartisan Policy Center.
Not surprisingly, Social Security and senior advocates are among the most vocal opponents of raising the retirement age.
“An increase in the full retirement age is just a benefit cut,” Joe Elsasser, founder and president of Covisum, a provider of Social Security claiming software, told CNBC.
But others point out that the U.S. government might not have any choice because of dwindling trust funds used to pay Social Security benefits. Having people wait longer to collect Social Security benefits – and perhaps work longer to help fund the program – could ease the funding shortfall. This is one reason some observers figure it’s only a matter of time before the retirement age is raised.
“I expect that at some point in the not-too-distant future, Congress will agree on a Social Security package that includes some type of adjustment to the retirement age,” Akabas said. “Whether that’s in two years or 10 years, it’s very difficult to predict.”
Congress might also raise the initial age when you can begin collecting Social Security retirement benefits from the current age of 62. The highest age for delaying benefits and earning benefit increases could be raised as well. Currently, that age is 70.
Raising these ages might not have as big an impact on Americans’ retirement plans as some critics think. That’s because people are already working longer than they did a couple of decades ago. In 2000, the average age when people retired was about 61 or 62, CNBC noted. Now the age is closer to 66.
“Just in 20 years, we’ve seen a substantial increase in the retirement age. People really, really are working longer,” said Mark J. Warshawsky, a senior fellow at the American Enterprise Institute and former deputy commissioner for retirement and disability policy at the Social Security Administration.
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