New Retirement Age Rules – Changes Coming to Social Security Benefits

The Social Security Administration (SSA) has recently announced possible adjustments to its retirement age requirements, which could significantly impact Social Security benefits. Knowing these potential changes and preparing your financial budget accordingly is crucial.

Rachel Greszler, Senior Research Fellow at the Roe Institute, has proposed raising the full retirement age (FRA) to 70. If her proposal is accepted, millions of future retirees will need to wait an additional year to receive their Social Security benefits.

Retirement Age

The full retirement age, or “normal retirement age,” is when individuals are eligible to receive full Social Security benefits. This age depends on one’s birth year and has increased over time as life expectancy has risen. Currently, early retirement starts at 62, with the full retirement age set at 67 for those born after 1960. Greszler argues that raising the FRA to 70 is necessary to address the SSA’s funding challenges.

Solvency

According to the SSA’s 2023 Trustees Report, action is needed to ensure the solvency of the trust funds supporting the nation’s largest retirement, survivors, and disability programs. Without intervention, these funds could be depleted by 2035. Greszler suggests gradually increasing the FRA from 67 to 69 or 70, indexing it to life expectancy, and raising the age by one or two months per year to preserve Social Security’s purpose.

Benefits of Raising the FRA

Greszler points out that improved health care, less physically demanding work, and longer life expectancies contribute to the SSA’s declining deficit. Additionally, older workers bring valuable experience and mentorship to the workforce, benefiting younger employees. They also have more options to ease into retirement rather than leaving abruptly, providing both financial security and continued income.

Inflation Adjustments

Greszler emphasizes that raising the retirement age alone will not solve the 2035 shortfall crisis. Inflation adjustments are also necessary. Updating age requirements addresses about 20-30% of the program’s shortfalls, while more accurate inflation adjustments could eliminate an additional 20-25%.

Criticism of Raising the FRA

Stephen Kates, chief financial analyst for RetireGuide.com, argues that raising the retirement age is a retrograde method of cutting Social Security benefits. He highlights that the earliest age to start receiving benefits is 62, while the full retirement age is 67 for those born after 1959. Claiming benefits early often results in a 30% reduction in monthly income. Increasing the earliest or full retirement age would delay benefit payments and reduce the amount future retirees receive.

Implications

If lawmakers do not act, the age to claim benefits could be raised, resulting in payout reductions similar to those predicted for the 2030s. This underscores the importance of considering both age and inflation adjustments when reforming Social Security.

Potential Adjustments

Birth Year	Current FRA	Proposed FRA
Before 1960	65-66	65-66
1960 and after	67	70

Average Monthly Social Security Payments

Benefit Type	Average Payment	Maximum Payment
Retirement	$1,900	$4,873
Survivors	$1,505	$3,653
Disability	$1,537	$3,822
SSI	$698	$1,415

Adjusting the full retirement age and making inflation adjustments are critical steps in ensuring the solvency and effectiveness of Social Security benefits. While raising the FRA could help address funding challenges, it is essential to consider the broader implications for future retirees’ financial security.

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