Latest Social Security Proposals Would See ‘Higher Retirement Ages’ and ‘Benefit Cuts’
With Social Security facing bankruptcy sometime within the next decade — and losing over 20% of its trust fund by 2032 — lawmakers are considering several options for Social Security reform.
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Ideas on the table include changing the way benefits are calculated and raising the full retirement age.
Legislators encourage higher retirement ages
Americans are currently reaching full retirement age somewhere between 66 and 67. Some proposals call for the Social Security Agency to raise the full retirement age. But an alternative would be simply to show Americans the benefits of waiting until age 70 to file for Social Security.
At age 70, you can earn deferred benefit credits, which could result in an annual benefit increase of 8% per year for each year between your FRA and age 70. Lawmakers and pundits alike believe that if they show Americans the math behind the decision, they’ll realize it’s wise to wait.
One option is to bring back bank statements sent in the mail. Showing the numbers on paper is expected to work the same as when credit card companies state how much interest you will pay over the life of your credit card debt. Seeing the increased Social Security benefit in black and white might make you reconsider your retirement plans.
However, that doesn’t help those who need their Social Security benefits to make ends meet. “[N]ot everyone has the luxury of choosing when to claim Social Security benefits. For some, the choice is being made because of financial pressures or medical needs for them,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center, in a recent Yahoo Finance article.
Social Security currently helps 67 million Americans enjoy their retirement — or just make ends meet each month. The Social Security Administration reported that among older beneficiaries, 12% of men and 15% of women depend on Social Security for 90% or more of their income.
Power cuts on the table
Other ways to shore up Social Security reserves include benefit cuts across the board. This could mean changing the way benefits are calculated.
One idea would be to calculate benefits based on the number of years a person has worked and contributed to the system. Currently, benefits are based on workers’ earnings over the 35 best-paid years of service. Some believe the proposed change would disproportionately affect people who have been out of work for some time, perhaps to serve as carers or raise children, or who have been forced into early retirement.
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“We encourage everyone to work longer hours. That’s the political justification for the change,” Mark Miller, author of Retirement Reboot, told Yahoo Finance. “But it’s just a way to cut benefits and it’s unfair and hitting the people who need the money most.”
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This article originally appeared on GOBankingRates.com: Latest Social Security Proposals Introduce ‘Increased Retirement Age’ and ‘Benefit Cuts’.