The Plan To Raise Social Security’s Full Retirement Age to 70
Two U.S. senators are leading a bipartisan group of lawmakers in a plan to raise the full retirement age from 67 to 70 as a way of shoring up Social Security before it becomes insolvent. Sens. Angus King (I-Maine) and Bill Cassidy (R-Louisiana) said they are taking steps to keep Social Security going before funding runs out in 2032.
“If Congress chooses to do nothing, current law requires painful 24 percent cuts to benefits and a daunting future for fulfilling our promises,” the senators said in a joint statement. “If we come together now, we can preserve and protect the retirement security of all Americans now and long into the future.”
Besides raising the full retirement age, the senators propose creating a $1.5 trillion sovereign wealth fund that would invest in stocks, according to the news platform, Semafor. The proposed fund would be separate from the existing Social Security Trust Fund. If the sovereign wealth fund fails to generate an 8 percent annual return, the senators’ plan calls for increasing the maximum taxable income and the payroll tax rate to ensure Social Security remains solvent for another 75 years.
According to Semarfor, another proposal under discussion involves changing the existing formula that bases monthly Social Security benefits on a worker’s average earnings over 35 years to a formula based on the number of years a person has worked and paid into Social Security. The senators say their plan does not call for cuts in benefits of retirees currently receiving Social Security.
The senators’ proposals come after the Congressional Budget Office (CBO) projected that Social Security would become insolvent in 2032. The CBO initially projected that Social Security would become insolvent in 2033. But the COB changed its projections, in part, after Social Security announced an 8.7 percent cost-of-living adjustment (COLA) in October, the largest COLA hike in 40 years.
Social Security, the largest program run by the federal government, pays benefits to retired workers and their dependents and survivors through the Old Age and Survivors Insurance program. Social Security also benefits disabled workers and their dependents through the Disability Insurance program. Social Security is funded primarily by payroll taxes.
Currently, workers can receive 100 percent of their Social Security benefits at the full retirement age of 67. The benefit is calculated from a worker’s lifetime earnings. Workers can also begin collecting Social Security benefits at age 62; however, the payments are reduced when filing for Social Security before the full retirement age.
The senators have not introduced any legislation on their plans since the proposals are still under debate.
“This is an example of two leaders trying to find a solution to a clear and foreseeable danger,” spokespeople for Cassidy and King told Semafor in a statement. “Although the final framework is still taking shape, there are no cuts for Americans currently receiving Social Security benefits in our plan. Indeed, many will receive additional benefits.”
But not everyone is on board with Cassidy’s and King’s proposals. Opponents say the senators’ plan is another way of cutting Social Security benefits because workers will have to wait longer to receive benefits.
Alicia Munnell, director of the Center for Retirement Research at Boston College, said raising the full retirement age for Social Security should be seen as a benefit cut.
“Anything that involves raising the retirement age is a benefit cut, and it’s particularly pernicious because it hurts the vulnerable,” Munnell told Barron’s. “It’s a poor lever to use.”
Munnell, however, said she was open to creating a sovereign wealth fund because a similar move has been successful in Canada. “Some equity component is a good idea,” she told Barron’s.
Andy O’Brien, communications director for the Maine AFL-CIO, which represents more than 40,000 members in King’s home state, called the proposal to raise the retirement age “absurd,” especially at a time when life expectancy for many Americans has been declining.
In an interview with ABC7 and Fox 22 in Bangor, O’Brien said he thinks lawmakers wouldn’t be so quick to talk about raising the retirement age to 70 if they spent their lives working in construction or fishing or the logging industry.
“Do we really want to force nurses, teachers, and restaurant workers to work until they are 70 years old before they can retire?” O’Brien asked. “People get burned out and exhausted, and just because you’re still alive in your late 60s doesn’t mean you’re still able to work full-time like you did when you were much younger. Mainers deserve to retire in dignity.”
The bipartisan group led by King and Cassidy are not the only lawmakers working on keeping Social Security afloat. In February, Senators Bernie Sanders (I-Vermont) and Elizabeth Warren (D-Massachusetts), along with U.S. Reps. Jan Schakowsky (D-Illinois) and Val Hoyle (D-Oregon) introduced a bill to make all income greater than $250,000 subject to the full Social Security payroll tax rate. Currently, income above $160,200 is not subject to the total payroll tax rate.
Sanders says that while the average Social Security benefit is only $1,688 a month, nearly 40 percent of seniors rely on Social Security for most of their income. In fact, one in seven rely on it for more than 90 percent of their income; and nearly half of Americans aged 55 and older have no retirement savings at all.
King and Cassidy said the plan to address the “existential threat” to Social Security has not been finalized. The lawmakers said there are other proposals under consideration, including locking early retirement at 62, which they called “an ironclad protection for lower-wage workers,” and “seeking avenues to increase benefits immediately.”
King and Cassidy described their efforts to address Social Security as “a complicated math challenge,” and they are “hearing out all possible pieces of that equation.”
“As soon as we have a fully developed plan, we’ll release it for discussion and debate,” the senators said in a statement.
Besides Social Security, the CBO also expects Medicare funds to be depleted in 2028, according to CBO Director Phillip Swagel. Medicare helps to pay for hospital and physician visits, prescription drugs, and other acute and post-acute care services for people 65 and over and younger people with long-term disabilities.