Personal Finance

Social Security: How Those 45 and Younger Could See Benefits Cut

Headed for 70?

Higher retirement ages affect retirees in two ways. The 1983 amendments didn't prevent people from claiming early retirement at age 62, but the higher full-retirement age leads to a bigger reduction in benefits for those who take them at their earliest opportunity. If a similar increase happens now, then those who would get delayed retirement credits for waiting beyond full retirement age will receive smaller bumps up in their monthly payments, because they'll have fewer months' worth of credit between a higher full-retirement age, and their maximum benefit at age 70.

The government has considered proposals to raise the retirement age even further, with some considering increases to as high as 70 years old. In order to minimize friction, lawmakers are likely to seek once again to put the full onus of retirement-age increases on younger Americans. If future legislation follows the framework of the 1983 amendments, then those born in 1970 or later could start to see retirement ages rise by a couple of months per year until they hit 68 or 69 and, after a possible period of stability, further increases as high as 70 could affect those in their 20s and younger.

Without further adjustments, raising the retirement age would reduce early retirement benefits by five percentage points per year. It would eliminate the eight percentage point per year delayed retirement credit for as many years as the full retirement age goes up.

Watch out for Social Security changes ahead

Proposals to increase the retirement age don't appear to be imminent. But, as talk of a Social Security crisis gets louder, you can expect more pressure on the government to make changes to sustain Social Security's long-term future. Raising the retirement age is one tried-and-true way to extend Social Security's life; but younger workers should be especially aware of possible future legislation that would go against their best interests.

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The article Social Security: How Those 45 and Younger Could See Benefits Cut originally appeared on

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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