Increasing Social Security Full Retirement Age to 70 Gains Momentum — How It Could Impact Benefits

Worried senior woman using laptop

Among the proposed changes to Social Security is to raise the full retirement age for recipients, which proponents say will bolster the program’s finances as one of its reserve funds heads for depletion. Now a pair of lawmakers have moved a step closer to bringing such a plan up for a vote.

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U.S. Sens. Angus King (I-Maine) and Bill Cassidy (R-La.) are leading a group of legislators in a proposal to raise the FRA to 70 from 67, according to reports this week from MarketWatch and Semafor.

The two senators have also proposed creating a sovereign-wealth fund that could be funded with $1.5 trillion or more in borrowed money. If the fund fails to generate an 8% annual return, both the maximum taxable income and the payroll tax rate would be increased to ensure Social Security stays on track to be solvent for another 75 years.

Other options on the table include changing the formula that calculates monthly Social Security benefits from one based on a worker’s average earnings over 35 years to a formula based on the number of years spent working and paying into Social Security.

Proposals to raise the FRA have been floated for quite a while amid reports that the Old-Age and Survivors Insurance (OASI) Trust Fund — which funds about 25% of Social Security benefits — will run out of money as early as 2032. When that happens, Social Security will have to rely solely on payroll taxes for funding under the current system.

The idea behind raising the FRA is that it will push more Americans to wait an extra couple of years to start claiming Social Security benefits, which could save money over the short term. So far, the idea has not advanced much past the discussion stage. The King-Cassidy initiative represents a much more concrete stop toward bringing such a plan up for a Congressional vote.

Social Security advocates and many lawmakers have pushed back against raising the FRA because of the potential financial impact it would have on seniors who are already struggling to make ends meet.

But spokespersons for Cassidy and King wrote in an email to MarketWatch that their plan doesn’t include any cuts for Americans currently receiving Social Security benefits, and that “many will receive additional benefits.” They also said the plan is not finalized and “the final framework is still taking shape.”

Even if the plan makes it to a Congressional vote, its chances of eventually passing into law are not great. The Senate and House would have to approve it, and then President Joe Biden would have to sign it — and as GOBankingRates previously reported, he has shown no inclination to support Social Security changes that would cut or delay access to benefits.

If the FRA ever does get raised to age 70, it would “significantly cuts benefits for anyone retiring before their new full retirement age,” according to the National Committee to Preserve Social Security and Medicare (NCPSSM), a nonprofit advocacy group.

The NCPSSM noted that when the full retirement age was 65, workers retiring at age 62 received an initial benefit that was 20% less than their full benefit amount. When the FRA rises to 67, workers retiring at age 62 will receive a 30% cut in benefits. If the age were increased to 70, a worker claiming retirement benefits at age 62 would have their benefits reduced by nearly half, according to the NCPSSM.

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“Instead of protecting future generations, raising the retirement age will dramatically cut benefits for younger generations of workers, especially those at lower-income levels,” the NCPSSM said in a blog. “The cuts will have their greatest impact on those who can afford them the least — lower income workers with a shorter life expectancy, who are less likely to be able to continue working to age 70.”

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