Retire at Age 70? Young People May Have to Under Proposed Plans

Washington – Young Americans might not get full Social Security retirement benefits until they reach age 70 if some trial balloons that prominent lawmakers of both parties are floating become law.

No one who’s slated to receive benefits in the next decade or two is likely to be affected, but there’s a gentle, growing and unusually bipartisan push to raise the retirement age for full Social Security benefits for people born in the 1960s and after.

The suggestions are being taken seriously after decades when they were politically impossible because officials — and, increasingly, their constituents — are confronting the inescapable challenge of the nation’s enormous debt.

Social Security was created in 1935 with a retirement age of 65, but since then life expectancy at that age has increased by about six years, according to the National Center for Health Statistics.

Today the full Social Security benefit retirement age is 66 for people born from 1943 to 1954. It then increases by two months for each birth year (66 years and two months for those born in 1955, 66 and four months for those born in 1956 and so forth), until those born in 1960 or later get full benefits at age 67.

Raising the age eventually to 70 could prove to be politically acceptable because it wouldn’t have an immediate social impact, but it would demonstrate that politicians are resolute enough to mend one of the government’s most popular social programs and to tackle the national debt.

If they did, they’d have substantial academic backing.

“For awhile, there’s been a consensus among economists that raising the retirement age makes a lot of sense,” said Richard Johnson, a senior fellow and the director of the Retirement Policy Program at the Urban Institute, a Washington research group.

Still, there are potential downsides.

“There are some incredible ramifications to raising the age,” said Barbara Kennelly, the president of the National Committee to Preserve Social Security and Medicare. “Not everyone can work until they’re 70.”

Despite such concerns, the trial balloons are firmly anchored.

Last month, House Majority Leader Steny Hoyer, D-Md., launched his in a major address to a Washington budget conference.

“We’re lying to ourselves and our children if we say we can maintain our current levels of entitlement spending, defense spending and taxation without bankrupting our country,” he said.

“We could and should consider a higher retirement age or one pegged to life span, more progressive Social Security and Medicare benefits, and a stronger safety net for the Americans who need it most.”

Soon after, House of Representatives Republican leader John Boehner of Ohio told the Pittsburgh Tribune-Review that the age “eventually” could be raised to 70.

“Raising the retirement age — going out 20 years and not affecting anyone close to retirement, and eventually getting the retirement age to 70 — is a step that needs to be taken,” he said.

“I think it’s time we have an adult conversation about the problems facing this country,” Boehner added later to Fox News. “Clearly, when it comes to Social Security, there’s a problem. We made promises our kids and grandkids can’t afford.”

House Speaker Nancy Pelosi, D-Calif., wouldn’t rule out the option.

Hoyer “made a very important statement about putting everything on the table,” she said, “subjecting everything to scrutiny when it comes time to figuring out how we lower the deficit in a very transformational way.”

Here’s why it’s being considered: The federal government faces a historic fiscal crisis. The nonpartisan Congressional Budget Office projects that publicly held debt could reach 62 percent of the gross domestic product by the end of this year, the highest since the Korean War year of 1952. By 2020, the CBO warns, the debt could hit nearly 90 percent of the GDP. History shows that when a nation’s debt gets that high, it can cripple the economy.

Last week the CBO issued a report suggesting that some adjustments must be made to Social Security’s financing. It projected that under the current rules, the system won’t be able to pay scheduled benefits starting in 2039.

However, the CBO also found that raising the full retirement age to 68 starting with workers born after 1966, or to 70 for workers born after 1978, and raising it gradually before that wouldn’t significantly improve the system’s financial outlook.

The CBO said that raising the age to 68 would reduce Social Security spending by only 3 percent, or 0.2 percent of the GDP, in 2040. A retirement age of 70 would save 6 percent, or 0.4 percent of the GDP.

The lawmakers stress that raising the full-retirement age should be only one of a series of Social Security changes.

Their views represent a subtle but important shift. Traditionally, Social Security was considered “the third rail” of politics — touch it and you die — because people cherished their benefits so much.

That changed only once, in 1983, when a bipartisan Social Security commission’s recommendations led to increases in payroll taxes and a gradual rise in the retirement age, putting the system on a path to solvency for decades.

In the years since, however, proposals for more changes have gone nowhere, but the debt threat is forcing another look.

A bipartisan national commission is weighing strategies to reduce the national debt, and the Washington buzz is that everything — even former untouchables such as higher taxes and cuts in Medicare and Social Security benefits _will be considered.

This week the International Monetary Fund urged the U.S. to cut future Social Security benefits, among other painful steps that it said were necessary to avoid unsustainable debt and an increased risk of global economic instability.

“If we could address Social Security reform,” said Peter Peterson, the founder and chairman of a foundation that works for federal debt reduction, “it would provide a much-needed confidence builder with our valued foreign lenders … so they don’t lose faith that we can manage our own fiscal affairs.”

Raising the retirement age for full eligibility would have two benefits, Gordon Mermin and Eugene Steuerle argued in a 2006 Urban Institute paper.

“In addition to helping Social Security,” they wrote, “working longer would also improve individuals’ own retirement finances by generating more retirement wealth and reducing the number of years their wealth needs to fund.”

Raising it also could cause social hardship, however.

Maggie Mahar, a New York-based health researcher at the Century Foundation, argued that raising the retirement age would hurt the poor and manual laborers.

“We all know that the poor die sooner. Poverty is stressful,” she said.

Mermin and Steuerle say it’s not that simple.

Low-income workers, they said, are more likely to have disabilities and get government benefits. In addition, they said, while raising the retirement age could increase poverty rates, “combining the change with a minimum benefit could mitigate the impact on vulnerable groups.”

Mahar countered, saying, “It’s not that easy to get disability.”

At least, she and others said, the debate has begun, and lawmakers are listening.

On The Web

Social Security retirement calculator

Treasury Department Q&A on debt

Peter Peterson remarks on the deficit

Congressional Budget Office long-term budget outlook

1983 Social Security commission recommendations

Official history of Social Security

National Committee to Preserve Social Security and Medicare website

Congressional Budget Office study on Social Security options