- Exactly when to retire is typically a personal decision.
- But Social Security reforms could affect how well people live based on that timing.
An increase in pension retirement age to 64 from 62 in France has sparked ongoing protests.
The U.S. could be poised for a similar change with the Social Security retirement age.
That shift would be unlikely to draw the same outcry seen in France. But some experts say younger generations should take to the streets — or at the very least take an active role in the discussions over how the program may be reformed.
"No one is talking about changing the [current] retirement age or doing anything that's going to affect current retirees" or near-retirees ages 55 and up, said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.
"This is going to affect younger people, working-age people," he said.
Social Security will face a critical inflection point in the next decade.
The program has been structured so that workers' contributions through payroll taxes largely fund the benefit income for current beneficiaries. But with 10,000 baby boomers turning 65 every day — which is expected to go up to 12,000 per day in 2024 — the program is facing a shortage in funding.
The latest projections from the Social Security board of trustees find the program's combined fund will be depleted in 2034 — one year earlier than was projected in 2022. At that point, just 80% of benefits will be payable.
The country has been here before. In 1983, changes were enacted to extend the program's solvency including taxes on benefits and gradually increasing the retirement age from 65 to 67.
Today, that higher retirement age is still getting phased in. People born in 1960 and later now must wait until 67 to receive their full "retirement age" benefits.
But as lawmakers swear off changes that would affect near- and current retirees, that largely leaves younger generations to pick up the tab on any coming changes to the program.
"All this stuff is coming back to haunt young people," said Laurence Kotlikoff, a Boston University economics professor and Social Security expert.
"This is a time for young people — millennials — to take to the street and have a rally down in Washington, because this is generational expropriation," Kotlikoff said.
A Social Security panel hosted by The Century Foundation and New York University this week focused on another cohort, Gen Z, who were born from the mid-90s to mid-2010s.
While Social Security's current dilemma will probably be fixed long before Gen Z is looking at retirement, they may bear the burden for the way the 20% to 25% funding gap is solved, said Laura Haltzel, senior fellow at the Century Foundation.
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Today, Social Security claimants take reduced retirement benefits if they start at 62 or 100% of the benefits they've earned if they claim at full retirement age, which is transitioning to 67. But if they wait until age 70, they get 8% more per year.
For example, if you are eligible for a $1,000 monthly benefit at full retirement age, you would get just $700 per month if you started at age 62. Alternatively, if you wait until age 70, you would get about $1,240 per month, Jason Fichtner, a former Social Security Administration executive and chief economist at the Bipartisan Policy Center noted during the panel.
Raising the retirement age would reduce benefits even further at age 62, for those earliest claimants who may not be able to afford to wait.
Consequently, it would be necessary to consider how such a change would affect high-income versus low-income claimants, Fichtner said.
Other changes could be on the table that broadly include increased taxes, benefit cuts or a combination of both. That could include raising the payroll tax rate — which is currently 12.4% evenly shared by workers and employers — or lifting the maximum wage income subject to those taxes, which is $160,200 in 2023.
If politicians cannot find either benefit cuts or tax increases palatable, they could turn to general revenue transfers, Fichtner noted.
That would amount to another $200 billion to $300 billion per year on top of the current $31.4 trillion national debt, he said.
"That means you're piling on debt to the next generation," Fichtner said.
"There is no free lunch here," he said.
Other creative solutions could be implemented, such as a carbon tax or a financial transaction tax on stock sales, he suggested.
Social Security will likely still be around for younger generations. However, depending on what changes are made, younger cohorts may bear the financial brunt, Haltzel noted.
"As we've seen in the past, politicians like to inflict pain not on the folks who are retiring now but who are coming down the pipeline, and so you're going to be firmly in the cross hairs," Haltzel said to the Gen Z audience members.
"Please get involved and stay engaged," she said.