Retirement age is often tied to when a Social Security recipient receives the full benefit amount. Social Security currently has "full retirement age" set between 66 and 67 years old for individuals born after 1943. With Social Security (SSI) drastically underfunded, policymakers posed the question: Should the retirement age be increased to 70?
The biggest reason policymakers are looking to raise the retirement age is to increase the solvency of Social Security. As things stand now, the Social Security trust fund is expected to run out of money by 2034. This does not mean that recipients no longer will receive Social Security, but that they will receive a reduced benefit. When Social Security was created, it was designed to provide supplemental income to retirees, who were expected to draw on it for an average of 10 years. With advancements in health care, the average retiree is living longer and receiving Social Security for a longer period.
An increase in the retirement age for SSI would not be the first. In 1983, there was comprehensive legislation designed to improve the fiscal strength of Social Security. Part of this legislation gradually raised the retirement age from 65 to 67.
Outside of increasing the solvency of Social Security, proponents of increasing the retirement age argue that people are living longer and can continue working for more years. Although life expectancy has increased on average, it is by no means across the board. The US Government Accountability Office wrote an article in April 2016 that discussed that lower-income men approaching retirement live three to 12 fewer years than higher-income men. So as this article suggests, higher-income retirees who are likely to rely less solely on Social Security, tend to live longer and, thus, benefit more from the system.
Most of the opposition to raise the retirement age comes from the fact that members of the workforce do not want to postpone retirement by another three to four years. Retiring early would cause a permanent reduction in benefits, by as much as 25%. Individuals who retired before 70 would be more likely to tap into savings to make up for the loss of income not provided by Social Security.
Increasing the full retirement age to 70 would have more support if benefits also increased. However, this is not the case. Instead, the benefit for someone who retired at 67 would be the same at age 70. Someone receiving a $2,000-a-month benefit would potentially lose out on $72,000 of a total benefit over the three years.
Nearly half of all recipients claim Social Security early and receive a permanently reduced benefit. Some of these recipients, especially those with lower earnings, are in poor health but don’t meet the stringent criteria for disability benefits. If the retirement age were increased to 70, a retiree at age 62 would receive only 57% of the full monthly benefit, assuming the initial-eligibility age is kept at 62 and not raised to 64 or 65.
There are other options besides raising the retirement age to improving SSI's solvency for the next 75 years. The Social Security payroll tax can be raised from 12.4% to 14.98% on the first $118,500 of wages. Another alternative is to cut current benefits across the board by 16%. Policymakers can also attempt to do a combination of both raising payroll tax and lowering benefits.
With an upcoming election, political candidates have brought this matter forward as a major issue that needs to be addressed. However, the country remains divided. Current retirees do not want their benefits reduced. The Baby Boomers, who are in the beginning phases of retirement, feel the same way. The Baby Boomer generation has funded most of the Social Security trust fund, and these individuals feel that they deserve the full benefit amount. Millennials, on the other hand, are concerned about longevity and fear the current policy is doomed to fail. Wealthy individuals generally support increasing the retirement age because they are not as reliant on Social Security as their middle- and lower-class counterparts are. Regardless of the solution, the solvency of the Social Security trust fund needs to be addressed, or millions of Americans face having their benefits cut.