Millions of Americans hit with new Social Security age rule

MILLIONS of Americans are retiring later than past generations as the final step of a decades-old law affecting Social Security’s retirement age takes effect.

The legislation from over 40 years ago is slashing Americans’ checks and forcing them to delay their retirement as the full retirement age rises to its highest level yet.

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Millions of Americans rely on Social Security for retirement, disability, and survivors benefits[/caption]

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The full retirement age, or FRA, is the age at which Americans can retire with access to their full Social Security benefits without a financial penalty.

The FRA is now reaching its highest level because Congress passed amendments back in 1983 that gradually increased it from 65 to 67, with the increase slowly phased in based on birth year.

Americans born in 1960 turning 65 this year are the first group that must wait until 67 for full benefits, though they can still file as early as 62 with reduced payments.

The retirement age change is already in the law and is fully baked into how the SSA calculates benefits today, meaning that the millions of impacted Americans will have to work even longer until they can collect their payments without penalty.

The switch-up to the FRA was made to adjust for longer life expectancies and to address concerns regarding the financial solvency problems of the Social Security program.

Its two main trust funds are expected to run out of their reserves in under 10 years due to the increasing life expectancies and retirement periods. 

AGE AUGMENTED

While the FRA is set for now, future legislation may bump up the retirement age even further.

Lawmakers are eyeing proposals to raise the FRA to 68, 69, or even 70, ensuring a more consistent ratio of work years to retirement years. 

Hiking the retirement age would mean that future retirees would receive benefits for a shorter period or at reduced amounts compared to current retirees.

In order for the FRA to change, however, Congress must pass new legislation – and Social Security Commissioner Frank Bisignano recently stated that this was off the table.

“President Trump and I will always protect, and never cut, Social Security. That’s why we have made many vital reforms, such as cutting waste, fraud, and abuse from the program, to ensure the solvency of Social Security for future generations of Americans,” he said in an X post.

“Raising the retirement age is not under consideration,” it added.

COUGH IT UP

Aside from bumping up the FRA, another reform to address Social Security’s financial struggles includes raising its revenues via payroll taxes.

To prevent the program’s trust funds from running out, Congress would have to immediately and permanently increase payroll taxes by 3.65%, per estimates from Social Security’s trustees.

HOW TO SUPPLEMENT YOUR SOCIAL SECURITY

Here’s how to supplement your Social Security:

Given the uncertainty surrounding Social Security’s long-term future, it’s essential for workers to consider ways to supplement their retirement income.

Senior Citizens League executive director, Shannon Benton recommends starting early with savings and investing in retirement accounts like 401(k)s or IRAs.

• 401(k) Plans
  • A 401(k) is a retirement account offered through employers, where contributions are tax-deferred.
  • Many employers also match employee contributions, typically between 2% and 4% of salary, making it a valuable tool for building retirement savings.
  • Maxing out your 401(k) contributions, especially if your employer offers a match, should be a priority.

• IRAs
  • An Individual Retirement Account (IRA) offers another avenue for retirement savings.
  • Unlike a 401(k), an IRA isn’t tied to your employer, giving you more flexibility in your investment choices.
  • Contributions to traditional IRAs are tax-deductible, and the funds grow tax-free until they are withdrawn, at which point they are taxed as income.

This would increase the taxes from the current 12.4% to 16.05%.

Although spiking payroll taxes would ensure the program’s longevity, it comes at a cost, Social Security and retirement planning expert Aaron Cirksena previously told The U.S. Sun.

“The tradeoff is that workers are taking home less now,” he said, noting that the payroll tax bump would affect lower and middle income workers the most.

“It’s smaller checks today in exchange for more certainty later that benefits are still there when you need them,” said Cirksena.

“Stability has a cost, and in this case the cost shows up in your paycheck before it shows up in your retirement account.”

Regardless of how lawmakers elect to fix Social Security’s money troubles, many Americans fear the future of the program.

“I am 50 next month and don’t expect Social Security,” said one Facebook user. “I’m screwed and so are the generations after me.”

“Some of us do backbreaking work,” cried another. “It’s pitiful the peanuts they leave us.”

As the SSA faces insolvency concerns, experts predict that the COLA bump will be higher than last year’s 2.5% increase.

Meanwhile, Social Security officials have clarified changes to the paper checks policy ahead of the September 30 deadline.