The government wants to raise the retirement age. It started as a rumor, but it is becoming more real. They have put a proposal on the table to increase (again) the retirement age so they can stretch the Social Security Administration funds a little longer.
Yes, inflation, life expectancy, and political gridlocks have all influenced the fact that there are more retirees and fewer funds in the reserves, but is it fair for those of us living through our 30s? At this pace, we will pay the pensions of the entire country and die working.
Why they want to delay retirement
Structural problems. Each year, Social Security pays out more than it takes in, and the trust fund (the reserve that covers the deficit) is running out quickly. Official projections say the funds will be completely depleted in five years.
What happens? If they raise the retirement age, they could “stretch” the system by reducing the number of beneficiaries and increasing the contribution period (remember that for now the FRA age is 67…). They call it an “inevitable adjustment” (but they don’t adjust their own salaries…).
Who would suffer the most?
Those with physically demanding jobs, health problems, or no access to private pension plans.
For many workers, retiring before the official age is not a whim, it is a necessity. If the reform is approved, those who cannot remain active for more years would have to accept significantly reduced benefits for a longer time.
The impact will not be the same for everyone, especially across social classes. Those with higher incomes and less physically demanding jobs will adapt more easily than vulnerable groups.
Washington vs. US
Congress and public opinion are deeply divided. Conservative sectors see raising the age as the most “realistic” way to adapt the system to the new demographic reality, but many Democrats and retiree advocacy groups argue that delaying retirement is a hidden cut. Forcing people to wait longer to receive the same amount, or accept less if they retire earlier, is a way to reduce benefits without saying it openly.
Raising taxes, cutting benefits… or both
Delaying retirement is not the only option on the table. Economists point to three possible paths: increasing revenue (for example, by raising taxes on higher incomes, which could be an option, right???), cutting future benefits, or combining both measures.
Another option is eliminating the salary cap on which Social Security taxes are applied, currently set at 168,600 dollars. That way, higher-income earners would contribute more to the system and more revenue would be collected. But of course, business owners and conservatives don’t want that, they prefer cutting from lower incomes.
What now?
It is still in the debate stage, with no approval date or new proposed age yet, but the idea is already on the table. We will have to wait a couple of months of discussions to know what alternatives are proposed or if we are going to be working until 72.
An inevitable and deeply controversial reform
It seems like we have to be thankful for retiring, when the reality is that after 20, 30 or 40 years of work we have to thank the state for giving us crumbs. It is our rest and we deserve it. Moving that line means altering a social pact that has been in place for generations.
Now that time is running out, the government needs to square the circle between financial sustainability and social justice. Will they manage to do it?