I must admit I don’t think much about Social Security as a retirement option these days. How could I when most financial advisors and experts tell you to plan around it and don’t depend on it because it won’t be there by the time you retire (unless you’re close to retirement). Personally, I focus on contributing to my company’s 401(k), my Roth IRA and traditional IRA as the best sources of retirment income. The Dallas Morning News recently summed up the Social Security situation quite well.
Many retirees depend so much on Social Security that any discussion provokes anger. The very young are the opposite – they dismiss it with a cavalier shrug, presuming that it won’t be there for them.
I suppose that exactly describes the view I just shared. What is social security, most youngsters ask? 
Raising the age to 70 to tackle debt problems
I recently found myself more interested in the subject when I discovered an article in the Dallas morning news suggesting the retirement age for Social Security benefits may be changed to 70 to help tackle the nation’s debt problem.
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.
How Does Social Security Work?
Here’s a quick run-down of how things work today from the article:
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 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.
What are the ramifications of such a change?
Of course, there are a few things people have to consider when paying off consumer debt. The Federal debt is no exception. You have to change spending behavior as well as make certain sacrifices. Unfortunately, this change or sacrifice would bring some less than desirable impacts to some people.
There are some incrediable ramifications to raising the age, said Barbara Kennelly, the president of the National Comittee to Preserve Social Security and Medicare. Not every one can work until they’re 70.
I think that’s a pretty important point Barbara makes. I suppose health problems and other situations could impact people extending their working years to 70. If you’re forced to retire early or sometime in your 60′s this could definitely impact your living benefits and may just be another reason to avoid the social security dependency if you’re you’ve got a ways to go to retirement.
What are the Positive Sides to the Change?
On the flip side, there are some benefits. According to a Market Watch article there are some positive benefits to the change beyond getting Social Security under control.
Working longer has many benefits: It increases the amount of money people can save for retirement, reduces the amount of money people need for retirement, and helps save Social Security.
In raising the age limit, people will be forced to invest in working skills longer. Another point noted in the article is life expectancy for people is increasing. That could mean people are going to work longer. Especially, when people desire to change careers and pursue work more geared around their life dreams in retirement. Furthermore, the Bible doesn’t advocate retirement.
In fact, an alternative suggestion is to index the retirement age to life expectancy. As life expectancy increases, so would the retirement age. Yet, another point discussed is raising the early retirement age. Today, people can retire early and receive less benefits. This would allow the funds to continue to grow.
Final Thoughts
I certainly can’t predict whether or not Social Security will be around when I retire. Again, my focus for retirement savings is using other retirement vehicles. I suppose yet another alternative is to extend the education about saving for retirement and teach people the value and importance in preparing for their future. Money management isn’t about letting someone else take ownership of your financial responsiblities such as our government. I feel people should take responsiblity for saving for their retirement and if Social Security is around it can be used as a bonus.
What are your thoughts on raising the Social Security retirement age to 70?
{ 13 comments… read them below or add one }
As a poor person in fair health who does not expect to live long enough to collect Social Security benefits, I note that the usual ‘fixes’ proposed are regressive because lower-income Americans have on average – ask any actuary – lower marriage rates (and thus fewer spouses and children to collect survivors benefits) and shorter lifespans. (Reducing benefits and/or raising taxes are for similar reasons also regressive.)
Clearly, if you’re not married and don’t have kids, you lose all your Social Security ‘contributions’ when you die before reaching the age required to collect SS benefits.
In the current political environment, imposing a ‘means test’ for Social Security benefits is tempting but merely redistribution in the other direction – downward – and I don’t support that either.
Privatization is the only reform of which I am aware which allows workers to own their accounts and pass them on to heirs at death, and does not redistribute income to others.
Unfortunately increasing retirement age to 70 alone would not be enough to keep social security solvent forever.
Given that life expectancy has increased a lot over the years, it makes sense to increase the minimum retirement age for social security. They are already doing that and the normal retirement age is going up to 67 gradually over the coming years. Indexing the retirement age to life expectancy sounds good conceptually, but I think that it would be better to just increase the minimum by fixed amounts so everyone is clear on whats hapening and when.
IMHO, raising the retirement age is just a band-aid on a gaping wound. There are much larger, systemic problems with government debt and deficits that need to be addressed before we will ever be in any kind of position to save Social Security. I think Timothy Geithner and every member of congress need to visit Christian PF and put some of these principles into practice! Our present financial course as a nation will just lead Social Security, and a lot of other things, into a VERY bad spot.
They force us all to pay into the thing for years and years. We had no choice. They keep raising the age, eventually the age will be so high no one will live long enough to collect it. Friends, this is what happens when government takes over something. They mess it up. Health care is the next thing they will mess up. Then wall street (our entire financial system)
@Financial Bondage
That’s just it. The government never expected or intended to deliver on it’s promise. That’s why they set Social Security’s minimum eligibility at 65. Coincidentally, the average life expectancy was also 65 at the time. In other words, the government thought they rigged the system so that, on average, it could collect 35-50 years of SS taxes and it wouldn’t have to pay out one dime of benefits. To this day, it is still bewildering to me that my grandparent’s generation fell for this scam. Then again, people still fall for Ponzi schemes all the time.
While I think raising the retirement age to 70 would cure a multitude of debt issues, two glaring problems would surface.
The first is Medicare. It currently kicks in at 65–would it continue to do so if social security is raised to 70? Medicare is projected to be the bigger of the two black holes by far, and raising it to 70 would help the debt even more. But who will insure the 65-69 year olds and at what cost. How many would be forced to go without health insurance altogether?
The second problem is the job market. It’s tough enough to get and hold a fulltime, benefited job past 50, let alone 65. And if we’re honest, that situation has been gathering steam well before the financial crisis.
Assuming raising the age to 70 is politically feasible–and it isn’t remotely–the rise in poverty that would result would be close to catastrophic.
An overhaul of the system has been needed for years and unfortunately there is no solution that will please everyone. Even those who decry socialism get angry when they get no cost of living raise on SS. I read once that when the plan was enacted the average number of children per family was five. This would mean that 5 would contribute to paying the monthly benefit of 1 or 2. The ratio has now changed due to the average family only having 2 children. A one to one ratio won’t support the system. I would prefer them lowering the monthly amount instead of raising the age but I have always expected that SS would be insolvent before I retired so never planned on it. The premiums I have paid benefit my parents generation and I’m glad for that. Also glad that the politicians are finally speaking the reality but when I went to a town hall meeting the audience was extremely angry with our respresentative just for telling the truth.
This is the one problem about raising Social Security to 70: many employers do not hire older workers, and find ways to get rid of the ones they have. Good, hardworking people in their late 50s or 60s find themselves jobless, can’t get a job that pays a living wage, and soon use up all their savings, investments, etc. After selling nearly everything they own, taking odd jobs, etc., the only thing they can turn to then is early retirement at 62, which is horrible! They draw Social Security early (can do this at 62) and this cuts their monthly payment in half. But they have no other source of income because, even though the layoff was not their fault, they cannot get another job. This has happened to several of my friends and it is very widespread. They had to start their SS to survive and now the government wants to raise the age. What are folks like that going to do in the meantime, live under a bridge?
I think planning as if Social Security won’t be there for us is the best course of action for us feeding into the system. Those of us who think ahead will save as best we can.
Raising the age is not enough of a change. There has to be widespread systematic overhaul. Why is it Medicare (taxes) pays a company $63 a month to rent a manual wheelchair for a recipient that can be purchased wholesale brand new for $165? Why is it when said recipient would like to purchase outright the same used wheelchair that company will sell it to them for $1000? Why are tremendous discounts given to Medicare recipients for medical services when the government (taxes) pay for them but regular people pay so much more out of pocket for the same procedures? Then there’s the tying of Social Security payouts based on the COLA, which is also terribly flawed. Does anyone even know how much of a tax dollar actually goes to recipients and how much goes for overhead? There is absolutely no accountability for any of this.
Really, the only answer is to RAISE TAXES. It is foolish to talk about solving the problem by raising the retirement age, when so many people in their 50s are losing their jobs and have no good prospects for finding another when there are five applicants for every available job. There are countless testimonies of unemployed people in their 50s who can’t get a minimum wage job because they’re told they’re too qualified! Taxes are low (really, they are! They were higher during the Clinton era!) and we can afford to do this. It is just political hype that makes ‘raising taxes’ the proverbial third rail. Let’s pay for what we need, and do it together.
I’m 60 years old, when i was 55 i went to collect my social security and they turned me down cause they said they changed the age 1 month before i turned 55. I don’t know what to do if they change it again. Is there any why we can find out when they will do this? I thank god that i lasted this long, now i have to worry i may not get my ss. Is there anything some one can do? I was depending on it.
Lisa, sggillesp and louise raise very valid points. Employers are not clamoring to hire 55-69 year olds. No one will hire them in any numbers because they are less productive and they have high healthcare costs. Many of them will have active medical problems. Raising the retirement age will commit many of them to homelessness and poverty.
SS is still scheduled to pay all benefits — from annual payroll taxes and the SS trust fund — until 2037. The only problem with that is the politicians have spent the $2.5 trillion that should be in the trust fund. And they replaced the money they took with (worthless) IOU’s (Treasury securities). Basically these scoundrels, like Bernie Madoff, took the money people were entrusting them with for their retirement and spent it on other things. It was a case of fraud, just as it is in the case of a private pension fund where the trustees loot the contributions and spend them on non-pension items. This is the only reason why there is a duscussion now of reducing SS benefits — because they stole the money. It’s also the reason why Obama created the deficit commission — to be able to obfuscate the theft and instead shift the blame to the evil SS recipient who merely wants the benefits he paid for. And it looks like that shell game is working judging by some of the comments here.
The other problem is the government is wasting too much money on war and defense spending. And this wasteful spending is preventing the government from reimbursing the SS trust fund. The Govt spends $707 billion on the Defense Dept., and close to $300 billion on related spending, for a total of about $1 trillion. Total personal and corporate income taxes paid total ~ $1.3 trillion. So we’re spending almost all income taxes on defense. China, the next highest defense spender, spends $70 billion/year. That tells you where the problem is.
i personally am not for extending the retirement age to 70… It is my money and i need it now…. If the jerks in Congress did not borrow from the fund, and paid back the money they stole from the fund , the money would be there …