Many Americans are looking forward to the moment when they will be able to stop working and officially establish their status as “retired”.
But when asked what age they think it might be, there is no consensus.
According to one poll, the average age when people say they hope to retire is 62 years.
It is also the age at which people can first claim social security pension benefits, provided they are eligible for benefits based on their work reports.
However, people receive reduced benefits for early treatment. If they wait until full retirement age to claim – usually 66 or 67, depending on when they were born – they receive the full benefit they earned. If they wait until the age of 70, they will receive an 8% per year increase in benefits compared to the full retirement age.
Meanwhile, the House of Representatives last week passed a retirement bill that would reduce the age of the required minimum distribution on some savings accounts to 75 from the current age of 72. This change, if passed in the Senate, will be gradual. in 2032.
The proposal reflects the reality that many people today tend to be healthier than in previous generations and therefore live and work longer, said Mark J. Warsaw, senior researcher at the American Institute of Entrepreneurship and former Deputy Commissioner for Pension and Disability Policy in Social Security. Administration.
“It should move to other official ages in the entire tax code and government programs, including social security,” Warsaw said.
Of course, there are no quick changes in the social security program.
“This has been and will remain the third line of politics because of the sensitivity of the public around this issue,” said Shai Akabas, director of economic policy at the Center for Two-Party Policy.
However, this does not mean that there is no need for this issue.
It is projected that the trust funds, on which the Social Insurance Administration relies for benefits, will be exhausted in 2034. At this time, 78% of the promised benefits will be paid, the government agency said last year.
To reinforce the program, lawmakers have a choice: increase taxes on benefits, raise payroll taxes, or raise the retirement age. Any changes accepted may include a combination of all three.
It should be noted that supporters of social security are strongly against changing the retirement age of social security.
“Raising the full retirement age is just a reduction in benefits,” said Joe Elsaser, founder and president of Covisum, a provider of social security software.
How can the retirement age change
President Ronald Reagan signs an amendment to the Social Security Act on April 20, 1983.
Corbis | Getty Images
The last time the retirement age was changed was in 1983 under then-President Ronald Reagan.
These changes, which increased the full retirement age from 65 to 67, are still being introduced today.
Elsaser noted that even just an increase to 66 out of 65 represented a 5% reduction in benefits.
Many experts expect that any future changes could push the retirement age of social insurance. It should be noted that the Social Security Act 2100: Sacred Trust, introduced last year by MP John Larsson, D-Conn., Will leave these thresholds unchanged and, in some respects, make payments more generous. But the law provides for a five-year term.
Separately, the Social Insurance Administration assessed the financial impact that other proposals on changing the age thresholds could have on the program.
“I expect that at some point in the not too distant future, Congress will agree on a social security package that includes some types of retirement age adjustments,” Akabas said. “Whether it’s in two years or in 10 years is very difficult to predict.”
Experts say that perhaps the full retirement age could be increased by a year or two, which can be gradually introduced.
In addition, lawmakers can also raise the starting age for retirement benefits from 62, as well as the highest age for deferring payments and increasing payments from 70.
Adjustments could make the most vulnerable – those forced to retire at an early age – not see the same type of benefit cuts, Aqabas said.
How to plan for future benefits
Geber86 | Veta | Getty Images
In 2000, the average age at which people retired was about 61 or 62 years. Two decades later, according to government figures, he is about 66 years old, Warsaw said.
“In just 20 years, we have seen a significant increase in the retirement age,” said Warsaw. “People really, really work longer.”
Anecdotally, Elsaser said he sees more people retiring earlier than they expected as their job prospects change.
This emphasizes the importance of planning ahead, so you anticipate everything that your retirement years will bring. Admittedly, this can be challenging given that Social Security can be subject to change.
If you’re 60 or older, there are fewer reasons to worry that any prospective changes will affect your preferences, Elsaser said.
But if you’re 45 to 60, it’s reasonable to plan for benefits cuts of about 5%, he said. For those who are even younger, a cut of 10-15% is possible.
Moreover, people of all ages also need to plan for worst-case scenarios where the program reaches a point where it can only pay part of the benefits, which could lead to a 24% reduction in retirement benefits.
“The real importance of planning is just to make sure all your bases are covered,” Elsaser said.