Raising the retirement age for Social Security is a hot topic of discussion, with many concerned about how it will impact benefits for recipients. Currently, Social Security payments are designed to reach 100% of the recipient’s owed amount at the full retirement age (FRA), which varies depending on birthdate. If the retirement age is increased, the value of payments decreases, with a FRA of 68 resulting in a roughly 7% decrease and a FRA in the 70s leading to a 23% reduction in benefits.
Some have criticized the benefits and retirement system for Congress, pointing out that it pales in comparison to the funds allocated for Social Security. While there is certainly government waste, such as during the pandemic stimulus where $5 trillion was authorized, the economic impact of such decisions is significant. In contrast, tax cuts primarily benefited corporations and wealthy Americans without yielding the promised increase in jobs, leading to a potential waste of $2.3 trillion if the benefits were made permanent.
Concerns have also been raised about non-citizens receiving Social Security benefits. However, only legal residents who meet all the eligibility requirements, including having paid into the system for a sufficient period, are eligible for benefits. Additionally, the federal government has borrowed from Social Security reserves, but this is done through the purchase of special financial instruments that must pay interest and eventually principal, similar to how life insurance companies operate.
The issue with borrowing from Social Security surpluses is compounded by low-interest rates over many years, leading to a decrease in reserves. With the baby boomer generation now retiring and living longer than previous generations, there is not enough younger people paying into the system to sustain ongoing payments. This demographic shift, coupled with low-interest rates, poses a challenge for the future sustainability of Social Security benefits and payments.
In conclusion, the debate over raising the retirement age for Social Security is a complex one that involves balancing financial sustainability with ensuring that recipients receive adequate benefits. While concerns about government waste and misallocation of funds are valid, it is essential to consider the broader economic impacts of such decisions. Ultimately, finding a solution that addresses the challenges posed by demographic shifts and financial constraints will be crucial for ensuring the long-term viability of the Social Security system.
