- As French citizens take to the streets to protest an increase in the retirement age, a similar shift in social security could occur in the United States.
- This is why experts say such changes will primarily affect the younger generation.
French citizens took to the streets to protest raising the pension retirement age from 62 to 64.
Some have suggested raising the retirement age as debate heats up over the need for social security reform in the United States.
Such adjustments are unlikely to include working and retiring people. Experts say this could leave young people mostly aware of future program changes.
“All these things are coming back to haunt young people,” said Lawrence Kotlikoff, an economics professor and social security expert at Boston University.
“Now is the time for millennials to take to the streets and rally in Washington because this is intergenerational exploitation,” Kotlikov said.
Social Security will meet a critical deadline within the next decade
Social security will face a significant turning point in the next decade.
According to the Social Security Council’s latest projections, the program’s general fund will be depleted in 2034, a year earlier than projected in 2022. Only 80% of the benefit will be paid at that point.
The program is structured so that workers’ contributions through payroll taxes provide the majority of current beneficiary benefit income. But with 10,000 baby boomers turning his 65 every day, by 2024 he is expected to rise to 12,000 a day, and the program faces funding shortfalls.
The country has been here before. In 1983, changes were enacted to expand the program’s ability to pay, including taxes on benefits and a gradual increase in retirement age.
Social Security’s retirement age is still being raised in stages, with people born after 1960 having to wait until age 67 to receive their full “retirement age” benefits.
Some suggest implementing similar changes again, based on the idea that people can work longer and live longer.
The change is unlikely to provoke the kind of backlash seen in France.
But experts say younger generations should play an active role in discussions about how to reform the program.
“No one is talking about changing the situation. [current] Howard Gleckman, senior fellow at the Urban Brookings Center for Tax Policy, said that “retirement age or doing things that affect current retirees,” or those approaching retirement age 55 and older. said no.
“This will affect young and working-age people,” he said.
Effects of Raising Retirement Age
A recent Social Security panel hosted by the Century Foundation and New York University focused on the potential impact on Generation Z, another generation born between the mid-90s and mid-2010s.
Social Security’s current dilemma will probably be resolved long before Gen Z thinks about retirement, but Gen Z could bear the burden of how to solve the 20-25% funding gap, Century says. Senior Foundation Researcher Laura Hartzel said.
Social Security claimants now receive reduced retirement benefits when they start at age 62 and receive 100% of their benefits when claiming at full retirement age, which transitions to age 67. However, if he waits until he is 70, he will receive 8%. More and more each year.
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For example, if you were eligible to receive a monthly benefit of $1,000 at full retirement age, you would only receive $700 a month if you started at age 62. Alternatively, if you wait until you’re 70, you’ll get about $1,240 a month, Jason Fichtner, a former Social Security Administration official and chief economist at the Center for Bipartisan Policy, said in a panel discussion.
Raising the retirement age would further reduce benefits at age 62, but for the earliest claimants who can’t afford to wait.
Therefore, we need to consider how such changes will affect high- and low-income claimants, Fichtner said.
“No free lunch here”
Other changes may be considered, including tax increases, benefit reductions, or a combination of both. That would include raising the payroll tax rate (currently 12.4% shared equally by workers and employers) and raising the payroll cap to which these taxes apply ($160,200 in 2023). may be included.
Mr. Fichtner said that if politicians are unsatisfied with cutting benefits or raising taxes, they may resort to a transfer of the General Fund.
This would add another $200 billion to $300 billion a year to the current $31.4 trillion national debt, he said.
“That means piling on debt to the next generation,” Fichtner said. “There is no free lunch here.”
He suggested other creative solutions could be introduced, such as a carbon tax or a financial transaction tax on stock sales.
Social security will still exist for younger generations. But younger generations could bear the economic brunt depending on what changes are made, Hartzel said.
“As we have seen, politicians prefer to inflict pain on those who are retiring now, not those who are retiring now, so you will have a firm eye on it.” Hartzel said. Generation Z audience.