Concerns about Social Security’s future have been raised by thousands of senior citizens in recent months, citing new ideas, potential payout reductions, and even a likely funding crisis. A new retirement age is expected to be implemented in the US, thus it appears that everything for seniors is set to change, according to the latest news.
The proposal in question pertains to experts and if approved, it would result in an additional year of waiting for millions of future retirees to start receiving their Social Security payments. It is possible to prevent Social Security from going bankrupt while increasing payroll and income tax revenues through gradual increases in the early retirement age (62), full retirement age (67), and late retirement age (70). These increases would result from longer and more intensive work hours.
Retirement Age Change in the US
Despite being one of the most effective programs in our country, Social Security is facing long-term financial difficulties since its expenditures are rising more quickly than its income. While living longer is generally a good thing, as the baby boomer generation retires over the next 20 years, Social Security will face higher expenses as a result of this trend.
Since each generation of pensioners is financed by current workers who anticipate receiving their own benefits upon retirement, Social Security is essentially a pay-as-you-go system. The more money Social Security receives in contributions, the more money it needs to provide benefits. Physically demanding professions and low-paid laborers have lower life expectancies than average, therefore raising the retirement age might result in disproportionate benefit reductions for them.
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A particular age may also be beyond the reach of certain employees in physically demanding employment. To counteract these impacts, however, some measures may be taken, such as modifications to disability regulations that will help certain employees who become unable of doing their tasks beyond a given age.
What is the Social Security Retirement Age?
Congress approved legislation in 1983 that progressively raised the Social Security full-benefit retirement age. Benefits for early retirement will still be available at age 62, but they will be further decreased.
A person who reaches the full-benefit age in 2017 (66 years and 2 months) will receive a monthly benefit that increases by 8% for each year that they wait to begin receiving benefits until the age of 70, at which point their benefits will be 132% of what they would have been at the standard retirement age. For those who want to begin receiving benefits at age 70, the maximum monthly retirement payout in 2017 is $3,538.
Why change it now?
Even while Social Security is not now experiencing financial difficulties, the program’s expenses are expected to rise faster than its income in the long run. If nothing changes, Social Security’s built-up trust fund will run out in less than 20 years, requiring either tax increases, benefit reductions, or a mix of both.
How would this affect me?
The most of reform ideas are step-by-step. According to one plan, the FRA can increase by one month every two years to reflect American’s lengthening life expectancies. Another suggests increasing Social Security benefits gradually but more sharply in order to further cut future expenses.
Regardless of how it is implemented, increasing the Social Security full retirement age makes sense since it lowers program expenses to ease the financial burden on future generations and aligns with Americans’ extending lifespans.
Will it work for all Americans?
A higher retirement age may result in disproportionate benefit reductions for low-wage workers and those with physically demanding employment, as these groups have shorter lifespans than average.
Furthermore, certain employees with physically demanding tasks might not be able to work past a particular age. Still, there are ways to lessen these consequences, such as modifying disability regulations to help some people who become unable of doing their occupations beyond a certain age.
Benefits of Raising the Retirement Age
- Social Security’s rising expenses would be moderated, making the program more viable for the ensuing decades. The details of raising the retirement age at the right pace and level will determine how much the expense rise is restrained.
- While enjoying a longer period of retirement, older workers would have more time to accumulate their retirement assets. Raising the retirement age makes sense as a component of the answer, given that one of the reasons behind Social Security’s budgetary difficulties is longer lifespans.
- The benefits that are currently provided to seniors would be extended to future generations, in accordance with the longer lifespans of Americans. The present Social Security benefit formula, which has been in use for more than 30 years and has been successful in balancing the conflicting interests of several demographic groups that receive Social Security payments, would be maintained in this way.
- Future retirees would ease the load on the upcoming generation of workers while receiving benefits comparable to those of their parents and grandparents. Future pensioners, whose average lifetime is expected to improve, will be able to live longer in retirement than previous retirees, so long as the retirement age remains unchanged.
Niamh Prescott has a degree in Mass Communication and an MBA in Finance. She has worked for two media houses and is now running her own media company.
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