Retirement age increase to 70 could ‘cut benefits’ for workers

Future generations will be detrimentally impacted if the retirement age is hiked, the National Committee to Preserve Social Security and Medicare (NSCPSSM) has warned. Policymakers are considering this option due to Social Security being reportedly at risk of insolvency, however, experts are highlighting that this will have a knock-on effect on people’s benefits.

On its website, the NCPSSM warns that policymakers proposing increasing Social Security’s retirement age “should recognize what a dramatic change this would be for millions of American workers”, adding that American life expectancy is decreasing rather than increasing.

The group added: “Instead of protecting future generations, raising the retirement age will dramatically cut benefits for younger generations of workers, especially those at lower-income levels.

“The cuts will have their greatest impact on those who can afford them the least – lower income workers with a shorter life expectancy, who are less likely to be able to continue working to age 70.  

“Considering the modest nature of Social Security’s existing benefits, cutting them further, no matter how it is accomplished, should not be the first or even the last place Congress looks for budget savings.”

Currently, the full retirement age stands at 67 for most American citizens but there are different rules for those who want to pick up their benefit entitlement early.

It is possible for those who retire earlier to begin getting Social Security payments at 62, but at a reduced rate.

Americans who are 65 or older are entitled to receive Medicare benefits but only if they have paid Medicare taxes for at least 10 years.

The longer people wait to claim their benefits, the amount they receive from Social Security will rise.

In last year’s report of Social Security Trustees, it was determined that the Trust Fund will be able to pay full benefits until 2035.

Furthermore, pending payroll taxes are forecast to be “sufficient” to pay 80 percent of scheduled benefits following this date, according to the NCPSSM.

Despite this, concerns have been raised by the report about Social Security’s solvency past this date.

As part of existing legislation, claimants will be hit with a 24 percent cut to their benefits if Social Security becomes insolvent.

One of the options being considered to prevent this scenario is raising the retirement age at which point someone claims their full benefits.

The last time the Social Security Administration changed the benefit age threshold was nearly 40 years ago.

Through the Social Security Amendments of 1983, the retirement age was hiked from 65 to 67 for anyone born in 1960 or later.

Despite being carried out to protect Social Security, increasing the age someone accesses their retirement benefit entitlement will be reportedly harmful to low-income workers.

According to the NSCPSSM, when the Full Retirement Age (FRA) was 65, those retiring at age 62 got an initial benefit that was 20 percent lower than their full benefit amount.

Following this, when the FRA hit 67, Americans retiring at age 62 will receive a 30 percent cut in benefits.

Experts from the NSCPSSM are sounding the alarm that increasing the age threshold to 70 would see a person’s benefit entitlement cut by nearly 50 percent if they retire at 62.

On top of this, the lack of popularity for such a proposal means that policymakers will find it hard to get such a change through Congress.

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