May 08, 2023
Congress may increase the full Social Security retirement age to 70. What are the implications?
When the retirement age was lifted in France, citizens protested. It remains to be seen whether that will happen here, but something must give because Americans are living longer and enjoying more benefits than anticipated.
When Social Security was enacted in 1935, the average U.S. lifespan was 61 years for men and 65 years for women. According to the National Center for Health Statistics, an American male born today is expected to live until 73.5 years old while a female is expected to live for 79.3 years.
There’s a current proposal by a bipartisan group of senators that would overhaul Social Security. This effort would increase the age for receiving full benefits to 70 (among other things) and is expected to face stiff opposition in Congress and from senior advocacy groups.
An idea is to create a sovereign wealth fund that could be funded with $1.5 trillion or more of borrowed money. If the fund fails to generate an 8% annual return, both the maximum income tax rate and the payroll tax rate would be increased to keep Social Security solvent another 75 years.
Yet another option is to change how Social Security benefits are calculated. Currently they’re based on average earnings over their 35 highest earning years. A new plan would base them on the total number of years working and paying into the program.
It seems that there’s no easy way out with Social Security reform. But something needs to be done. Personally, I think it’s better to keep the system alive, even if that’s on different terms, than to let it fail entirely. Either way, this places even more importance on proper retirement income planning.