Why retirement age matters for Social Security and Medicare

(CNN) 62, 65, 67, 70.

All of these ages are important when it comes to Social Security and Medicare.

And those ages are also targets in the contentious debate over how to shore up the faltering economies of the massive entitlement programs.

Republican presidential candidate Nikki Haley has recently focused on raising the retirement age for Americans in their 20s as a way to reform Social Security, saying it should match their life expectancy. The controversial stance was echoed by GOP Rep. Nancy Mace of South Carolina on CNN’s “State of the Union” last Sunday. None of them said what the new retirement age should be.

Many people may think that people can start collecting their full Social Security benefits at age 65, which was the retirement age for decades. But Congress changed that as part of its 1983 overhaul of the entitlement program.

Lawmakers gradually increased the full retirement age — the first to be affected were people who turned 65 in 2003. Americans born in 1960 or later must wait until they turn 67 to get their full benefits.

But unless Congress acts, neither Social Security nor Medicare will be able to provide their full benefits within the next decade or so.

Social Security’s administrators said last year that the program’s combined pension and disability funds will be exhausted by 2035, at which point Social Security will receive only enough income to pay 80% of scheduled benefits. A more recent forecast by the Congressional Budget Office set the date at 2032 for the depletion of the pension fund.

Meanwhile, Medicare administrators said last year that its hospital insurance fund, known as Part A, would drain its assets by 2028. At that point, it will only be able to pay 90% of benefits. CBO set the date at 2033.

The retirement of the baby boomers has put a lot of emphasis on the two programs. As the American population ages, there are fewer workers paying into the programs and supporting the overwhelming number of beneficiaries who are also living longer.

In total, nearly 66 million retired workers, their dependents and survivors, disabled workers and their dependents receive monthly Social Security payments. For many retirees, benefits make up the bulk of their income in their older years.

And more than 65 million senior citizens and people with disabilities are enrolled in Medicare.

Proposals to raise the retirement age typically focus on when people should be able to get their full benefits, though some plans are also floating, and set the age for early retirement and Medicare eligibility.

Advocates argue that Americans are living longer and should be able to stay employed longer. Opponents say some workers, especially those in physically demanding jobs, should be allowed to retire at earlier ages.

Raising the Social Security retirement age is a cut in benefits, but people support this method of strengthening the program, said Alicia Munnell, director of the Center for Retirement Research at Boston College.

“People are saying this: We can do it either through benefit cuts, tax increases or raising the full retirement age,” said Munnell, who favors bringing in more revenue. to rebuild the trust funds. “There is no third option – there are only benefit cuts or tax increases. Raising the full retirement age is a mechanism to cut benefits.”

Deferral of pension benefits is a hot-button topic not only in the US but also in Europe. The French government is currently pushing through controversial plans to raise the country’s retirement age from 62 to 64, which has ignited weeks of protests and strikes.

Here’s what you need to know about retirement age in the United States

Age 62: Americans can apply for Social Security benefits as early as age 62. But it will result in a lifetime reduction in payments.

For example, those whose full retirement age is 67 will only receive 70% of the benefit if they claim at 62.

If the full retirement age is increased, it could mean an even greater cut in benefits, depending on how the legislation is written.

Congress allowed women to collect a reduced benefit at age 62 in 1956 and extended the option to men in 1961.

Fewer people are applying for early retirement. About 25% chose to do so in 2021, down from 52% in 2005, according to an American Academy of Actuaries review of Social Security Administration data.

Age 65: This is where one can sign up for Medicare coverage. Most people sign up for both Part A, which covers hospitalizations, skilled nursing home care, hospice and some home nursing care, and Part B, which covers doctor visits, outpatient treatment, medical supplies and preventive services.

The initial enrollment period begins three months before one turns 65 and ends three months after one’s birthday month. Those who wait to sign up may face obstacles, including having to pay a fine or suffering a gap in coverage.

Age 65 was also the average age for people choosing Social Security benefits in 2021 — 65.1, to be exact, according to the academy.

Age 67: Americans born in 1960 or later must wait until age 67 to be eligible for their full Social Security benefits.

This age is typically the target for reforms, with some options raising it to 70 for future retirees. Doing so could wipe out about a third of Social Security’s 75-year deficit, according to Munnell.

Raising the full retirement age would bring it more in line with changes in life expectancy, which has increased by about six years since Social Security was created in 1935, said Linda Stone, senior pension fellow at the academy.

Age 70: Those who delay their retirement until age 70 will receive a larger monthly Social Security benefit thanks to a credit Congress created in 1972.

For example, workers born in 1960 can receive 124% of their benefit if they don’t enroll before age 70.

But waiting beyond that age won’t increase their monthly payments any further, so the Social Security Administration recommends people apply when they reach 70, even if they’re still working.

Few people are delaying collecting their Social Security benefits, although the proportion is growing. About 21% chose to receive benefits after their full retirement age in 2021, up from 5% in 2005, according to the academy.

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