In recent Republican presidential debates, attention has shifted back to the Social Security retirement age.
By 2034, the Social Security Board of Trustees predicts a depletion of the program’s combined funds, potentially leading to a scenario where only 80% of benefits can be paid.
To address this, lawmakers might consider options such as increasing taxes, reducing benefits, or a mix of both.
During the November debate among Republican presidential candidates, the idea of increasing the retirement age was discussed as a potential change.
Republican presidential candidate Nikki Haley emphasized the importance of honoring promises in addressing Social Security.
Haley expressed the need for maintaining commitments made to current beneficiaries while considering changes, like adjusting the retirement age, for future generations, especially individuals in their 20s.
Retirement Age Adjustments Will Impact Social Security Benefits
History reveals that the retirement age has been adjusted in response to Social Security solvency concerns.
In 1983, amid similar challenges, legislation was enacted, introducing several modifications, such as gradually increasing the full retirement age from 65 to 67.
Even today, this change continues to be implemented.
The full retirement age marks the point at which beneficiaries can receive 100% of their earned benefits.
Opting to claim benefits before reaching full retirement age results in a permanent reduction in monthly checks for those individuals.
For those who choose to wait until age 70, there’s a potential for an 8% increase in benefits for each year beyond full retirement age.
Economist Jason Fichtner Emphasizes Addressing Early Claiming Challenges
Jason Fichtner, Chief Economist at the Bipartisan Policy Center, highlights that the contrast between a benefit at age 62 and age 70 amounts to a substantial 77% increase, emphasizing its significance.
Raising the retirement age could result in a more significant reduction for those claiming benefits early. Despite the advantages of waiting until age 70, nearly 90% of today’s retirees choose to claim earlier.
Experts suggest there are potential changes that could incentivize beneficiaries to delay claiming.
Economist Fichtner recommends strengthening the minimum benefit alongside any increases to the retirement age to avoid deeper benefit cuts for claimants compelled to take retirement benefits at 62.
4 Ways to Get Bigger Social Security Checks
1) Rely on alternative funds while delaying Social Security Checks
Financial experts currently advise utilizing alternative income sources while delaying Social Security benefits. New research from the Schwartz Center for Economic Policy Analysis proposes promoting a “Social Security bridge option,” encouraging workers to rely on retirement accounts before claiming benefits.
This strategy could potentially boost monthly Social Security benefits, with waiting even slightly longer yielding higher returns.
While the bridge option is beneficial for those with retirement savings, additional policies may be necessary for individuals without such resources.
The Schwartz Center for Economic Policy Analysis suggests that employer-sponsored retirement accounts could adopt bridge payment plans, distributing funds until they run out or until a retiree reaches 70.
Alternatively, a separate account for bridging could be set up by the Social Security Administration.
According to Ghilarducci, once individuals have accumulated funds in their retirement accounts, there should be a straightforward way for them to receive lifelong guaranteed income, aligning with people’s preferences.
2) Bridge annuities to boost Social Security Checks
Fichtner emphasizes that even waiting just one to three years longer for Social Security benefits, until ages 63, 64, or 65, can have a significant impact.
To cover the income gap during this delay, a bridge annuity could be beneficial, providing a guaranteed stream of income.
While annuities involve upfront costs, Fichtner suggests the trade-off might be worthwhile, especially for accessing the guaranteed growth associated with delaying Social Security benefits.
Individuals considering this strategy should consult a financial advisor, and there’s a possibility of annuity options expanding within retirement plans.
However, Fichtner notes that annuitizing may not be suitable for everyone, especially those without access to employer-sponsored plans or meaningful savings.
3) Bridge benefit for physically demanding jobs
To address the challenges faced by workers with physically demanding jobs who can’t wait until full retirement age, a National Academy of Social Insurance task force suggests the creation of a bridge benefit.
This benefit could begin at age 62 and last until full retirement age, helping mitigate the potential reduction in monthly income.
Eligibility for the bridge benefit would be based on a history of physically demanding jobs, with requirements most stringent at age 62 and gradually easing up to full retirement age.
The bridge benefit would provide half the difference between the full retirement age and the reduced age 62 benefit, offering a partial solution to the early claiming penalty. Similar benefits have been implemented in other countries.
4) Enhancing the special minimum benefit for low-earning workers
The special minimum benefit provided by Social Security, designed to supplement income for workers with low earnings over many years, has lost value over time.
Unlike regular Social Security benefits linked to wages, the special minimum benefit is tied to prices, making it less relevant as wages outpace prices.
The Schwartz Center for Economic Policy Analysis suggests improving the special minimum benefit by raising benefit levels, re-indexing them, or adjusting eligibility rules.