Raising the Retirement Age: A Likely Solution to Strengthening Social Security

Politicians’ Assurances Don’t Matter: Plan for a Higher Retirement Age

Even though politicians from both parties have assured Americans that the retirement age won’t be lifted, from a financial planning perspective, you may be better off tuning them out.

A Rule of Thumb to Consider

Here’s a rule of thumb to consider: If you’re in your 40s, plan for the retirement age — which is currently 67 — to be one year higher by the time you retire. Tack on two years if you’re in your 20s.

Why the Retirement Age is a Hot Topic

At least, that’s the recommendation in a new white paper analyzing the looming Social Security funding shortfall by HealthView Services, a company that offers software for financial advisors.

The Current State of Social Security

The phrase “retirement age” refers to the age when someone is eligible to receive full Social Security benefits. You can currently claim benefits as early as 62, but your payouts will be reduced if you claim before 67.

What’s at Stake

It’s an especially hot topic heading into the November election. Vice President Kamala Harris and former President Donald Trump have said they won’t cut Social Security benefits and seem opposed to touching the retirement age. But one way or another, Congress is going to have to shore up the program’s trust funds, which are on track to be depleted in roughly the next decade. Barring a legislative solution, benefits would automatically be cut by 21% in 2033, affecting current and future beneficiaries.

What Could Legislators Do to Fix Social Security?

The idea of an overnight cut of that size is intolerable to almost everyone. For context, it would result in a roughly $250,000 reduction in lifetime payments for the average couple 10 years away from retiring.

Will Congress Actually Raise the Retirement Age?

HealthView Services CEO Ron Mastrogiovanni says history is the best indication that lawmakers will increase the retirement age when push comes to shove, noting that the retirement age was gradually raised to 67 under legislation passed in 1983 that affected individuals born in 1960 or later.

What Does This Mean for Your Retirement Planning?

People ages 40 and under are more likely to be affected by a change to the retirement age, the main reason being that Congress would need to give people time to adjust their retirement plans in response.
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