Raising the retirement age for Social Security even by just a year or two would result in significant reductions in payments for most Americans, a new analysis shows.
Under the current Social Security system, the full retirement age is 67, but people can claim benefits as early as age 62 or as late as age 70. If you wait to collect Social Security, your monthly payments will be larger: Claiming at 62 means a 30% penalty, and waiting until 70 means a 24% bonus.
A new analysis by the Center for American Progress, a left-leaning think tank, finds that changing the full retirement age from 67 to 69 “would cut benefits by thousands of dollars per year for a population that has not shown significant interest in delaying retirement.”
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 details of the proposal are sparse, any change to the retirement age would likely have major financial implications for most Americans who will be eligible to claim Social Security benefits when 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’s also important to note that if lawmakers were to pass such a change down the road, Americans who have already retired and claimed benefits wouldn’t be affected. (Roughly 70 million people receive Social Security, including older adults and people with disabilities.)
But even a gradual increase in the retirement age would likely be met with major backlash from the public, as the program is highly popular and a vital part of most people’s retirement planning.
Other proposals to address Social Security’s funding issues like increasing taxes would surely be controversial as well.
Without a legislative solution, Social Security trust fund reserves are on track to be depleted just over a decade from now. At that point, only 83% of benefits would 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 benefits at age 62 could face a 39% penalty instead of the current 30% maximum penalty. That would result in an almost 13% reduction in benefits.
“The median-wage retiree turning 62 in 2034 would have their monthly benefit cut between $345 and $741, depending on the age at which they claimed benefits,” according to the analysis. “After just one year, they would lose between $4,140 and $8,892.”
Waiting until age 70 to claim Social Security would only net Americans an 8% bump, versus the current 24% increase in monthly payments you get for waiting three years after the full retirement age.
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