Hi, I need to draw your attention to a substantial alteration that some Republicans in the House are proposing that would affect when you begin collecting your full Social Security benefit. It’s a plan that would make you work longer to collect your full retirement benefit—and one that would cost many people money.
What’s the proposal
The Republican Study Committee (RSC) has suggested a 2025 budget that would raise the full retirement age (FRA) to 69 by 2033. Presently, the full retirement age is 66 or 67, depending on your birthdate. In this proposal, however, that age would be raised incrementally to 69, meaning you’d need to wait longer before you could collect your full Social Security benefits.
If this becomes a law, nearly 75% of Americans, or about 257 million people, would be impacted. That’s all of us potentially having to work longer or settle for smaller monthly payments.
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How much could you lose?
And here is the bad news: Raising the retirement age to 69 would cut your Social Security benefits by about 13%. On average, that’s a decrease of about $3,500 annually, or up to $420,000 less over your lifetime. Naturally, it would not affect everyone. Some individuals, notably those who have physical jobs, would lose even more.
When would this happen?
The change wouldn’t be immediate but would begin in 2026, and by 2033, the maximum retirement age would be 69. That’s a lot sooner than the previous major increase, which, over 33 years, raised the retirement age from 65 to 67. So, workers born in the 1970s or later could be seeing this new retirement age before they’re done working.
Will this save Social Security?
You might assume reducing benefits like this would save Social Security for decades, correct? Not so much. The Congressional Budget Office (CBO) says this change would only push Social Security’s trust fund running out a year, from 2034 to 2035. So, it doesn’t actually solve the large money issues Social Security is grappling with in the long term.
Also, there’s concern that too many manual laborers will not be physically capable of working longer. Instead, they may try to claim disability benefits, something that could also strain Social Security’s disability program.
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What are others saying?
Democrats oppose this plan. They label it as unfair and a “betrayal” to veterans, seniors, and working families. They worry it will cut Social Security and hurt other essential programs like Medicare and food stamps. Democratic lawmakers have already pledged to fight this plan and instead want billionaires to be taxed more in an effort to finance these programs.
What Should You Do?
Since some significant Social Security reforms could be coming down the pike, financial planners are recommending that you prepare your retirement plan just in case. That might involve:
* Boosting your 401(k) contribution by 2 or 3%
* Making sure you’re receiving maximum employer match from your business
* Diversifying your savings via the likes of Roth IRAs and Health Savings Accounts (HSAs)
* Meeting with a financial planner to plan accordingly
Why this matters to you
If you were born between the years 1943 and 1954, your full retirement age is now 66. If you were born after 1960, it’s 67. But with this new proposal, if it’s approved, people born in the 1970s and later may have to wait until the age of 69 for full benefits. That’s a pretty big leap and will make retirement look very different for younger Americans.
So, do consider your retirement plan and keep informed. Things at Social Security are changing, and being aware of what’s happening will enable you to build a more financially stable future.
