Should Social Security's Retirement Age Be Increased to 70?

The Social Security Trust Fund, which is the backup fund that is used to pay the balance of retirement benefits when there is a shortfall in revenue from payroll taxes is in trouble. According to a recent report by the Social Security Administration, the trust fund is on track to be run out of money in 2034. The non partisan Congressional Budget Office estimates that the Trust could run out of money as early as 2025. Should that happen, the Social Security Administration estimates that the system will only be able to pay 79% of benefits from payroll tax revenue. To fix this problem, Congress has tossed around several ideas, the most prominent being raising Social Security’s Retirement age to 70 years. In this article, we explore all the options available to fix the Social Security Trust Fund crisis.

There are 5 ways Congress can fix the Social Security Trust Fund projected shortfall.

Option 1- Raise the Retirement Age

Since people are living longer and retirements are lasting longer, another way to keep the Social Security Trust Fund solvent is to raise the retirement age. The argument for this change is that the current Social Security system was not designed to finance 20 to 30 years of retirement. Life expectancy in the U.S has gone up steadily during the last four decades. Today, a 65-year-old man on average will live to 84, and a 65-year-old woman to 87. That means that people are collecting Social Security benefits for longer periods than the program was designed to support.

The table below from the Heritage Foundation shows life expectancy and retirement data over the last 75 years. There is no denying that the life expectancy during the time Social Security was created in 1935 is lower than it is today and is expected to continue to grow, reaching 86.5 in 2080.

Given this fact, one would expect the retirement age to be adjusted upwards to deal with this reality. Unfortunately, Congress has not changed the age at which workers can receive full benefits since 1983 (when it was increased from 65 to eventually 67 in 2022), or the early eligibility age of 62 since 1961. As a result, the system is collecting less money than it is paying out and given the demographic makeup of the U.S, that financial reality is not going to change. That is why raising the retirement age makes sense to some people.

Option 2 - Cut Benefits

This solution essentially means that if Congress does not do anything to fix the Social Security Trust Fund shortfall, then by 2035, the Social Security Administration will only pay out 79% of benefits to recipients, which will be a 21% cut. This will affect those who retire in 2035 and beyond. Another idea that is often floated around is to cut benefits to current recipients. For example, cutting current benefits by 17 percent would solve the Social Security Trust Fund shortfall for the next 75 years. However, that means that current retirees will be getting less money than they were promised. It also means they will be getting less than they put in.

Polls show that there is overwhelming opposition to this idea. A March 2016 Pew Research poll [found](http://time.com/money/4547505/election-2016-social-security-donald-trump-hilary-clinton/} that 71 percent of registered voters oppose benefit cuts, including to Social Security.

Option 3 - Raise Payroll Taxes

Currently, the Social Security system is funded a 12.4% payroll tax, which is split between employees and employers (employees pay 6.2% FICA tax, then employers match this with a 6.2% payment). Those who are self-employed pay the entire 12.4%. Since this is not raising enough revenue to cover current Social Security payment to retirees, Congress could raise the payroll tax percentage to raise more money to cover payouts. A recent Gallup poll found that half of Americans would be in favor of raising taxes in order to keep the Social Security program solvent.

Option 4 - Raise the Social Security Income Threshold

Another solution to fixing the Social Security Trust fund problem is to subject more income to Social Security taxes. Currently, the Social Security tax only applies to income earned below a certain threshold. That threshold was $118,500 in 2016. One way to bring in more money into the system is to eliminate the cap, subjecting all income to Social Security taxes. If this is too drastic, Congress can choose to make more income subject to Social Security taxes.

Option 5 - Reduce the Cost of Living Adjustment

In 1973, Congress passed a law allowing for cost-of-living adjustments, or COLAs for Social Security and Supplemental Security Income (SSI) benefits to keep pace with inflation. For 2018, Social Security recipients will be getting a 2 percent cost-of-living adjustment, the biggest increase since 2012. This will boost the average monthly Social Security payments to $1,404, or $16,848 a year. Some have proposed reducing this annual increase, to slow down the growth of payments

March 18, 2018