In the United States, raising the retirement age has been the subject of a lot of debate in recent months.
The Congressional Budget Office (CBO) was asked by Congressman Brendan Boyle to show how beneficiaries would be affected if the retirement age was raised from 67 to 69.
He specifically asked how raising the full retirement age (FRA) would affect beneficiaries in different ways depending on their gender, how much they earn, and the decade they were born in.
The Congressional Budget Office just replied to Boyle. Here are the most important things you need to know.
Social Security may face a change in the full retirement age requirements
According to the Congressional Budget Office, raising the full retirement age (FRA) would mean that all beneficiaries would get less in Social Security benefits over their lifetime.
Workers would get the same monthly payment for a shorter amount of time if they chose to delay their retirement benefits by the same number of months that the FRA goes up.
If a worker chose to start getting retirement benefits at the same age as they would under current law, they would get less money for the same number of years. The budget for Social Security would be better if benefits were cut.
These predictions are based on the idea that Social Security will keep making payments as required by law, even if the trust funds for the program are in bad shape.
The Congressional Budget Office (CBO) says that if Social Security’s trust funds were merged, they would have no balance at all in fiscal year 2034.
This means that the total amount would not be enough to cover the difference between scheduled benefits and annual trust fund earnings.
If the CBO’s predictions had been based on the idea that benefits would only come from certain funding sources after the expiration date, then benefits after the due date would be less.
For people born in 1965, the full retirement age will be 67 years and 3 months. For people born in 1972 or later, the age will rise by 3 months for each birth year until it reaches 69.
The earliest age to start getting retirement benefits is 62, and if you start getting them more than 36 months early, each month you get them will be 5% less.
The proposed approach would mean that people who claim benefits before their FRA would see a bigger cut in their monthly payment than they do now.
If a person filed a claim after reaching full retirement age, they would get the monthly benefit amount, which is also called the primary insurance amount (PIA). This amount is used to figure out the benefit decrease.
For example, workers born in 1972 whose FRA is 67 would see their monthly benefits cut by 30% if they chose to start collecting benefits at age 62 instead of their FRA.
On the other hand, if their FRA was $69, which it would be under the given policy, their benefits would be 40% less than their primary insurance amount.
Under the defined program, people who claimed retirement benefits before their FRA would still get more money (up to age 72) than people who claimed benefits at their full retirement age.
The policy raises the FRA by two years, and there is an age at which the benefit of delaying the claim for bigger retirement payments ends.
What would be the impact of the new retirement age on Social Security benefits?
Instead of looking at the proposed increase in the FRA, the CBO looked at the average lifetime Social Security benefit as a percentage of average lifetime earnings.
They also looked at the average annual benefit that retired workers would get if they started collecting benefits at age 65.
For the many groups it made, CBO estimated the effects of each measure based on things like a person’s gender, lifetime household income quintile, and decade of birth. 4.
Raising the full retirement age would slightly increase the amount of money the government spends on Social Security disability insurance (SSDI), but it would not have a direct effect on the benefits workers who meet Social Security’s requirements would get.
