The American Academy of Actuaries — a group of usually sober and sensible people — recently issued a brief making the case for “Raising the Social Security Retirement Age.”
Their argument is straightforward. Social Security is running a 75-year deficit equal to 3.5% of taxable payrolls. The only way to fix the problem is to raise revenues or cut benefits. Life expectancy at 65 has increased, and is projected to continue to increase, which pushes up program costs. Therefore, Congress should make people work longer and postpone claiming their benefits. Raising the full age to 70 could cut the long-run deficit by about a third.
Just to be absolutely clear, increasing Social Security’s full retirement age is not just a question of “postponing” claiming; it is a benefit cut. Those who are able to delay retirement receive one less year of benefits. Those who cannot adjust their retirement behavior get lower benefits due to the increased actuarial adjustment — an adjustment made to keep lifetime benefits constant regardless of claiming age. Currently, those claiming at age 62 receive only 70% of the benefit available at 67. If the full retirement age were increased to 70, that amount falls to 55%.
Read: Republicans have painted themselves into a corner over fixing Social Security’s finances
I’m against any form of benefit cut, because the rest of the U.S. retirement system seems quite wobbly to me. At any moment, only about half of private sector workers are covered by any type of workplace retirement plan. That means some people never are covered and are totally reliant on Social Security, while others move in and out of coverage and end up with modest balances.
Read: Do I need to file a tax return if most of my income is from Social Security?
We actually know how much people have in their retirement accounts from the detailed financial data in the Federal Reserve’s Survey of Consumer Finances. As…
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