Why retirement age matters for Social Security and Medicare

(CNN) 62, 65, 67, 70.

All of these age groups matter when it comes to Social Security and Medicare.

And these age groups are also targets in the contentious debate about how to shore up the shaky finances of the massive entitlement programs.

Republican presidential candidate Nikki Haley recently focused on raising the retirement age for Americans in their 20s to reform Social Security, saying it should match their life expectancy. The controversial position was echoed by South Carolina GOP Rep. Nancy Mace on CNN’s State of the Union last Sunday. No one said what the new retirement age should be.

Many people may think that people can start collecting their full Social Security benefits at age 65, which was the retirement age for decades. But Congress changed that as part of its 1983 revision of the entitlement program.

Legislators have gradually raised the full retirement age – the first to be affected were people turning 65 in 2003. Americans born in 1960 or later must wait until they turn 67 to receive their full pensions.

However, unless Congress acts, neither Social Security nor Medicare will be able to perform to their full potential for the next decade.

Social Security trustees said last year that the program’s combined pension and disability trust funds will be exhausted by 2035, by which time Social Security will only be collecting enough income to pay 80% of planned benefits. A more recent forecast by the Congressional Budget Office put the date of 2032 for the pension trust fund to be exhausted.

Meanwhile, Medicare trustees said last year that its hospital insurance trust fund, known as Part A, would use up its assets by 2028. At this point he will only be able to pay 90% of the benefits. The CBO set the date as 2033.

The retirement of baby boomers has put a heavy strain on the two programs. As the US population ages, there are fewer workers contributing to the programs and supporting the increasing number of beneficiaries who are also living longer.

In all, nearly 66 million retirees, their dependents and survivors, disabled workers, and their dependents receive monthly Social Security payments. For many retirees, benefits make up the bulk of their income in old age.

And more than 65 million seniors and people with disabilities are enrolled in Medicare.

Proposals to raise the retirement age typically focus on when people should be able to start receiving their full benefits, although some plans also raise the age for early retirement and eligibility for Medicare.

Proponents argue that Americans should be able to live longer and work longer. Opponents say some workers, particularly those in physically demanding jobs, need the option to retire earlier.

Raising the Social Security retirement age means reducing benefits, but people support this method to strengthen the program, said Alicia Munnell, director of the Center for Pensions Research at Boston College.

“People say this: we can get it either by cutting benefits, raising taxes, or raising the full retirement age,” said Munnell, who advocates more revenue to replenish the trust funds. “There is no third option – there are only benefit cuts or tax increases. Raising the full retirement age is a benefit reduction mechanism.”

Postponing pension payments is a hot topic not only in the US but also in Europe. The French government is currently pushing through controversial plans to raise the retirement age from 62 to 64, which have sparked weeks of protests and strikes.

Here’s what you need to know about retirement ages in the US

Age 62: Americans can claim Social Security benefits as early as age 62. However, this will result in a lifetime reduction in payments.

For example, people whose full retirement age is 67 will only receive 70% of the benefit if they claim at age 62.

Depending on the legal situation, an increase in the full retirement age could lead to even greater cuts in benefits.

Congress gave women the option of receiving a reduced benefit at age 62 in 1956, and extended the option to men in 1961.

Fewer people are applying for early retirement benefits. About 25% chose to do so in 2021, up from 52% in 2005, according to a review of Social Security Administration data by the American Academy of Actuaries.

Age 65: This is when one can sign up for Medicare coverage. Most people sign up for both Part A, which covers hospitalization, skilled nursing facilities, hospice care, and some home nursing, and Part B, which covers doctor visits, outpatient care, medical care, and preventive services.

The initial entry period begins three months before reaching the age of 65 and ends three months after the month of birth. Those who wait to enroll may face hurdles, including paying a penalty or a coverage gap.

The age of 65 was also the median age of people opting for Social Security benefits in 2021 — 65.1 years to be precise, according to the Academy.

Age 67: Americans born in 1960 or later must wait until age 67 to be eligible for their full Social Security benefits.

This age is usually the target of reforms, with some options raising it to 70 for future retirees. That could wipe out about a third of the Social Security Trust fund’s 75-year deficit, Munnell said.

Raising the full retirement age would better align it with changes in life expectancy, which has increased by about six years since the introduction of Social Security in 1935, said Linda Stone, a senior pension fellow at the Academy.

Age 70: Those who defer retirement until age 70 get a higher monthly Social Security benefit thanks to a credit convention created in 1972.

For example, workers born in 1960 can receive 124% of their benefit if they do not enroll until they are 70 years old.

Waiting beyond that age won’t increase their monthly payments any further, however, so the Social Security Administration recommends that people apply when they’re 70, even if they’re still working.

Few people delay receiving their Social Security benefits, although the proportion is growing. According to the Academy, around 21% chose to claim benefits after reaching full retirement age in 2021, up from 5% in 2005.


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