It’s looking as though the push to increase the Social Security Retirement Age to 70 is gaining some traction. With all the other news items of late, this initiative has drawn scant attention. However, for anyone following the solvency (or lack thereof) of the Social Security system, it’s been evident for decades now that something needs to be done. It’s not like one day, poof!, the fund will be empty. But over the next several years, various pre-emptive efforts are going to be needed to maintain the fund, else it becomes just another unfunded liability for the US, which is already Trillions of dollars in debt.
Social Security History
Back in 1935 when Social Security was formed, the retirement age was set at 65 years old, meaning Americans could start receiving their full benefits at that age. Note however, that at that time, the life expectancy for an American was dramatically lower. This is key because the much higher life expectancy we enjoy today could never have been envisioned when the fund was formed. Currently, there’s a slightly complicated formula for determining full benefits depending on the year you were born such that full benefits accrue between the ages of 65-67.
Social Security Retirement Age Increasing to 70
Now, politicians on both sides of the aisle are pursuing an increase to age 70 for younger Americans. Take heed, Americans set to retire in the next few years, even next 2 decades perhaps would be unlikely to be affected. First off, they would not have ample time to plan and adjust to this change in retirement expectations (so they say), and of course, they comprise a significant voting block, so it would be politically unpopular to do so. However, it would be much more palatable to increase the retirement age for 20 and 30-somethings, right? First off, most people in that demographic either don’t even think about Social Security at all, or the cynics say they’ll never see a dime of it anyway. So, to guarantee that there will be a benefit at age 70 beats nothing at all to the younger crowd. As such, it’s entirely plausible this initiative would pass muster with constituents in order to keep the fund solvent. This could actually be considered one of the US Austerity measures that we’ll inevitably be forced to swallow in the coming years much like what the EU has already committed to.
While younger people may balk at an increase, the truth is, we ARE living longer. And this fund wasn’t really meant to be a “retirement nest egg” but an emergency fund for the elderly who perhaps grew ill, didn’t have pensions and retirement funds, etc and who can just count on an inheritance? For the well-off or those who work well into their 60’s, considering the paltry payout to begin with, it probably shouldn’t be viewed as a sea change in retirement standard of living for a young American who plays their cards right during a lifetime. Granted, we’ve payed into the system for so many years and our parents’ generation will receive more generous benefits than we will, but this is reality. America is spending more than we’re making and our burn rate is such that it is clearly unsustainable. Perhaps it’s not fair, but given 20-30 years notice, perhaps it’s more fair than the tax hikes and redistribution of wealth that’s happening all within the first two years of the current administration. If we’re looking to curtail further tax hikes at the federal level (state tax hikes are inevitable virtually everywhere), something’s gotta give. The CBO projects that by 2020, our debt to GDP ratio will hit an astounding 90% of GDP which is detrimental to everything from our interest rates (with mortgage rates currently at an all-time low) to a collapse of the US Dollar as the world’s reserve currency to our standard of living. While I’m not a huge fan of shifting out benefits to those paying in now, I view it as something that pretty much “has to” and ultimately, will, happen.
What are Your Thoughts on Social Security?