When we hear about raising the full retirement age under Social Security the next thing we usually hear is “benefits cut.”
No it is not a cut in benefits at all. Participants can avoid a lower payment by adjusting their collection date. In addition, proposals stretch the changes over decades.
The problem is the way we look at the benefits. Full retirement age is age 70. If you begin collecting at an earlier age you lose some benefits that are adjusted for the longer period of time the benefits will be collected.
Think of a standard pension plan. Normal retirement is age 65, but early retirement is permitted at age 55. The person taking early retirement receives a lower benefit which may or may not be a true actuarial reduction because it may be subsidized by the plan sponsor. The person can add to their benefit by working past age 65 because of higher earnings and longer service which are typically part of the benefit formula.
In the case of Social Security, higher earnings can increase the benefits.
SAYING YOU ARE GOING TO FIX Social Security by increasing the full retirement age is, well, pretty dumb. It is a lightening rod, it is misunderstood and for some workers who do not equally participate in increased life spans, it is unfair. It is also a way to avoid what really needs to be done – in conjunction with other changes – raise taxes🤑
RAISING THE FULL RETIREMENT AGE TO 69 does not fix Social Security. Social Security remains insolvent. The trust funds will run out in 2035 at which point all beneficiaries will face a sudden 18% benefit cut.
If you want to try some of your ideas for saving Social Security here is a calculator where you can model the impact of various changes and combinations of them.
QUINNSCOMMENTARY 
The shortfall is already being covered by the taxpayers due to the Trust Fund bonds being redeemed annually to cover the shortfall that exists today. Unfortunately, it is covered by more borrowing instead of current taxes due to the inability of Washington to get its fiscal act together. I believe a viable program can be put together and one funded entirely by designated tax collections.
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That doesn’t address the real problem when all bonds are redeemed In ten years
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In 10 years the need will be for enough of an increase in payroll taxes to cover the “shortfall” that year and for each year after. The amount of increase will be by the whims of the politicians at the time. Whatever the methods, I think it would be a good time to consider the funding of a true retirement system for the people who aren’t going to have anything but Social Security to live on. Will it require more tax than continuing the current basic program, sure, but it might be worth a shot.
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I am one of those people who aren’t impressed with the trust fund. If it runs out the effect is zero as far as government borrowing goes to pay the benefits shortfall. It clouds the thinking needed to make the program whole.
That said, I’m coming around to the idea of using Social Security as a true retirement program for at least the lower quintile and maybe the lower 2 quintiles. The benefits should be increased to a true retirement level. These folks are never going to put together retirement savings and a true pension system would create a viable living for those who do make it to their 60’s. Will it cost more, yes. Will it seem unfair to the higher ups on the income scale, yes.
I see it as an alternative to spending more welfare money on people who don’t have the resources at a later stage of their lives. We have to increase the payroll taxes either way.
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While it is true the Trust fund is an intergovernmental accounting tool, should the Trust be depleted and should the law be changed to allow general revenue to make up the difference between, it sure won’t be zero effect on borrowing or the deficit. It would mean an immediate increase in the deficit and hence borrowing.
Revenue comes in to the Trust, in the past the Trust purchased special interest paying Treasury bonds that were Trust revenue. As it does with any bonds sold the proceeds were used to run the government. Now that bonds are being redeemed by the Trust, the Treasury must come up with the cash to pay the Trust to pay benefits – more borrowing.
Should we get the the predicted shortfall, the money for those payments must come from somewhere.
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