The Real Social Security Retirement Age is Already 70

A Quick Hits piece, and a nice catch from Alicia H. Munnell at MarketWatch. The actual, real, functional retirement age for Social Security is … 70 years old. The logic is impeccable.

Your bottom line — The full Social Security benefit is pegged to a “retirement age” that’s many years after most people retire.

Your other bottom line — Who needs a Grand Bargain? You’re already being screwed by Social Security. Thanks to every Democratic and Republican politician who keeps taxes low for Your Betters.

The next time you’re at a private jet airport (where no one’s daughter gets porn-scanned), thank David Koch and Robert Rubin for the gift of Catfood for your Gran. Really, shake their hand. They’re responsible.

The Details

Here’s Ms. Munnell with the story (my emphasis):

Social Security’s retirement age is 70. The simple fact is that monthly benefits are highest at age 70 and are reduced actuarially for each year they are claimed before age 70. This is a relatively new development, which may explain why Social Security’s retirement age is the best-kept secret in town. But I think it’s time we told folks. And then we need to clarify what all this talk about raising the so-called full retirement age really means. …

Currently workers can claim their benefits at any time between 62 and 70. But benefits claimed before age 70 are actuarially reduced. That is, benefits claimed at younger ages are lower by an amount that compensates for the fact that they start earlier and will be paid for more years.

The goal is to ensure that, based on average life expectancy, people who take a lower benefit early would expect to receive about the same total amount in benefits over their lifetimes as those who wait for higher monthly benefits but start receiving them later. In other words, the claiming age affects monthly benefits but, on average, does not alter total benefits paid over the lifetime.

So, we have a benefit structure that pays full benefits at an age when most people have stopped working. We have set that age at 70. If you claim after 70, lifetime benefits decline, because monthly benefits are not increased for claiming after 70. If you claim before 70, your monthly benefit is significantly lower.

Reread that and think it through. Your max benefits are only available if you claim at age 70, but most people retire earlier. You’re therefore punished (actuarially) if you claim when you retire. Huh. Wasn’t always so, as she documents.

On the other hand, tax-coddled billionaires can still afford that 12th cottage in France (the 11th was in so the wrong département, and drafty) as they hire your replacement in China. “Job-creators,” don’t you know.

Class War? Can’t Be — This is America

As the writer says: “Most people don’t understand how much claiming early reduces monthly benefits.” Indeed. Please do read. She gets it. This will change your thinking, especially if you think that the extra money for not claiming until age 70 is a perq. It’s not; it’s the new normal. It will cost you five years of catfood already if you wait to claim your full benefit.

But wait. Do the neoliberal Dems want you to have even less? Let’s check.

Does Class War Kitteh have his head screwed on straight? You decide.

Hmm. Stay tuned. I sense the potential for a serious Dem misstep on this, but I could be wrong.