The conversation around raising the retirement age can seem like a financial lifeline — or a threat, depending on your political affiliations.
In June, the Republican Study Committee released a plan to tackle ballooning national debt, with one suggestion to raise the full retirement age from 67 to 69. Just last week, prospective Republican presidential candidate Nikki Haley backed such an increase, suggesting retirement age be tied to life expectancy.
“Social security is going to go bankrupt in 10 years,” Haley said in an interview with Bloomberg News. “Sixty-five is way too low and we need to increase that and we need to do it according to life expectancy.”
Haley’s predictions are exaggerated. The social security system will not go bankrupt, though without reforms, the current system will pay out full benefits until 2037, according to the Social Security Administration; after that, it’s expected to pay out 76% of benefits.
President Biden has not laid out plans to raise the retirement age during his administration, and instead proposed tax increases to Medicare from 3.8% to 5% for those making over $400,000 in his 2024 budget. He’s spoken forcefully against Republican proposals to make changes to the current social security system.
“I know that a lot of Republicans, their dream is to cut Social Security, Medicare,” Biden said in a February speech after the State of the Union. “Well let me say this: If that’s your dream, I’m your nightmare.”
Today, the full retirement age — when seniors are eligible to collect their full Social Security payments — is 67-years-old for those born in 1960 or later. People can start collecting partial payments at 62, and become eligible for Medicare at 65. While raising the retirement age has been a frequent debate in the past, the last major social security reform was in 1983, which gradually raised the retirement age from 65 to 67 by 2022. Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, predicts any new changes would take just as long to implement.
“If you’re talking 2040, 2050, there could be some gradual update for those who are under 50 now. But I don’t see that it’s going to change for those already in their 50s because that’s typically a tough sell,” Copeland says. “They don’t have as much time to adjust to what they’re doing. That’s why they did it so gradually last time they changed the retirement age for Social Security.”
The argument often made for raising the retirement age is to adjust for an increase in life expectancy. Over the past 100 years, life expectancy has increased 25 years, according to data from the United Nations. As individuals live longer, they’d be likely to use more benefits.
“The main rationale behind it is the increase in longevity among those who reach social security and retirement age, as they’re expected to take benefits for far more years than those who did 30, 40, 50 years ago,” Copeland says. “To keep what the lifetime benefits are, one way to do that would be to increase the retirement age so that you would still keep it near the same number of years of benefits that have been received in the past.”
A retirement age increase could also encourage those who are able to continue working to do so for longer, continuing to pay into the system and saving more for themselves, Copeland says. However, longevity doesn’t always equate to good health, a potential issue for those who need benefits early.
“They’re still contributing money, they’re not taking benefits out, which can help the entire economy to have more people working,” Copeland says. “But individuals retire much earlier than expected because of reasons they can’t control, such as their health. There’s also the issue that those who are in that situation are more likely to be lower income and have less resources available.”
Tapping into benefits earlier can have a negative domino effect: If individuals can’t wait until their full retirement age, their benefits are reduced, adding additional strain on family members or government programs to help fill those gaps. If the age is raised even higher, that strain intensifies even more.
“If you’re 63 and your health is in such a way that you can barely move around, or you have chronic diabetes and can’t move your hands or legs, it becomes almost impossible for you to work,” Copeland says. “There is a population of people that will be left way behind.”
Copeland suggests one alternative to raising the retirement age is to loosen the standards for claiming disability benefits so individuals can utilize those benefits rather than tapping into retirement income.
“There’s not a huge safety net available for people who are not working if they don’t qualify for disability,” Copeland says. “There would have to be some revenue raising, whether it’s adding for the really highest wage people or or raising the tax overall, whichever way it goes.”
No matter the available benefits, Copeland advises individuals to save as much as they can and work hard to eliminate any debt — easier said than done, he admits. Retirees should also plan for a reduced standard of living before they reach retirement, which can help them save more today and be prepared for any adjustments in the future.
“Most likely, when you stop working, your standard of living is going to go down and it’s going to be almost impossible to try to adjust to a lower standard of living,” he says. “Get your finances in order now, save more. It will help you once you reach retirement.”