In early January, the Congressional Research Service released a report entitled The Social Security Retirement Age. The report proposes several different types of changes to both the early eligibility age (EEA) and full retirement age (FRA) in response to long-term trust funding issues in the program—it is projected that by 2035, Social Security will only be able to cover 79% of the expected benefit amount.
Pros and Cons of Increasing Retirement Ages
Proponents of bumping up the Social Security retirement age say that life expectancy is increasing, health conditions of older Americans are improving, and there are more jobs available that are suitable for older employees.
Those who oppose increasing the retirement age point out that the above improvements are not fairly distributed across all Americans of different genders, races, educational statuses, or income levels. Increasing the retirement age for Social Security purposes may then negatively affect workers at lower income or educational levels.
Another issue is that a higher retirement age might tempt some workers who have health issues to apply for Social Security disability benefits, which could drive up costs for that program.
Finally, increasing the retirement age may put some older workers at risk of unemployment, as they would no longer be eligible for Social Security benefits.
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Pros and Cons of Increasing Only the Full Retirement Age
The report says that many policymakers over the years have recommended increasing the FRA, but keeping the EEA at its current 62; in 2016, there were at least three proposals (which ultimately never went anywhere) to bump up the FRA.
A higher FRA would result in a lower benefit payable at most claiming ages. This course of action would help Social Security in the long term. Workers would continue to work and delay benefits for longer, and when they do start taking benefits, they would last for a shorter time.
Pros and Cons of Increasing Only the Early Eligibility Age
The study reports that increasing the EEA—but keeping the FRA as it is—would lead to many beneficiaries between age 62 and the new EEA to delay claiming benefits and increase their monthly benefits. However, it would also likely cause financial hardships for those between 62 and the new EEA who can’t work beyond age 62—such as those people who have chronic health issues.
If the EEA were to be increased but the FRA stayed the same as it is now, there would be no long-term benefits to the Social Security program. In fact, while taking this route would help the program in the short term, monthly benefits would increase over the long term, offsetting those near-term savings.
Pros and Cons of Increasing Both FRA and EEA
A number of proposals have suggested raising both the EEA and the FRA (but keeping a five-year separation between the two, as exists now). Doing so would avoid reducing the amount of benefits that early claimants receive; however, it would also potentially challenge workers between age 62 and the new EEA who can’t work past age 62 due to health or other issues.
Increasing both ages would reduce the long-term Social Security trust fund shortfall by 26% to 47%, depending on the new ages established for each.
No matter what happens to Social Security in the future, deciding when to start taking benefits can be a tough call with lasting effects. If you’re nearing 62 and are trying to figure out the best Social Security strategy for your situation, why not get a second opinion from one of our financial advisors? Click here to schedule a free, no-obligation meeting with one.