Raising Social Security’s Full Retirement Age to 70 Gains Momentum — How It Could Affect Benefits

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

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U.S. Sens. Angus King (I-Maine) and Bill Cassidy (R-La.) are leading a group of lawmakers 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 financed with $1.5 trillion or more in borrowed money. If the fund does not generate an 8% annual return, both the maximum taxable income and the payroll tax rate will be increased to ensure that Social Security remains 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 one based on the number of years spent working and paying into Social Security.

Proposals to raise the FRA have been floated for some time amid reports that the Old-Age and Survivors Insurance (OASI) Trust Fund — which finances 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 a few extra years to start claiming Social Security benefits, which could save money in the short term. So far, the idea has not progressed much beyond the discussion stage. The King-Cassidy initiative represents a much more concrete stop to bring such a plan to 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 already struggling to make ends meet.

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

Even if the plan makes it to a congressional vote, its chances of ultimately being passed into law are slim. 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 changes to Social Security that would cut or delay access to benefits.

If the FRA is ever raised to age 70, it would “significantly reduce benefits for anyone who retires 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 who retired at age 62 received an initial benefit that was 20% less than their full benefit amount. When the FRA rises to 67, workers who retire at age 62 will receive a 30% reduction in benefits. If the age were increased to 70, a worker claiming retirement benefits at age 62 would have their benefits cut by nearly half, according to the NCPSSM.

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

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This article originally appeared on GOBankingRates.com: Increasing Social Security Full Retirement Age to 70 Gains Momentum — How It Could Impact Benefits

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