Retirement age headed for a boost?
When the dust and/or mud settles after the presidential election, one question likely to be on the national agenda is whether to “reform” Social Security and Medicare and, if so, how.
Privatizing Social Security may be a dead duck, but other possibilities remain. One idea, raising the age for benefits, was the subject of this recent National Bureau of Economic Research (NBER) paper.
The NBER paper factors “age inflation” into the calculation, recognizing that people generally live longer now than when the rules were made. To illustrate, the authors say that if eligibility ages had been adjusted since these programs began, here’s what they would have looked like as of 2004 (the ranges reflect different methods of calculating the adjustment):
• Social Security early retirement age (currently 62) would have been 65.6 to 67.
• Social Security normal retirement age (currently 66 to 67): 73 to 81.8.
• Social Security delayed retirement age (currently maxes out at 72): 76 to 78.6.
• Medicare eligibility (currently 65): 70 to 72.
• Penalty-free IRA withdrawals (currently 59.5): 63.8 to 66.
What would a change like this mean to you? If you’re already retired or expect to retire in the near future, probably nothing. It’s unlikely that politicians would be so brazen as to change the rules of the game that quickly.
However, if your retirement is decades off, be forewarned. Pay particular attention to any moves to raise the Medicare age, unless you’re sure of having other health coverage past age 65.
Comments anyone?—Greg Daugherty
Greg writes the “Retirement Guy” column each month in the Consumer Reports Money Adviser newsletter.
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Posted by: | Aug 26, 2008 4:22:54 PM
For all you other 'Lucky' Boomers out there, this is (another) warning. Social Security and Medicare will either dry up or only survive with massive cuts before our generation is done. The math is incontrovertible. The only way to be secure in our retirement is to plan for it without Social Security and Medicare. We'll need to save accordingly or plan on going back to work and doing without.
Posted by: Boomers in Denial | Aug 26, 2008 4:26:22 PM
Been saying it since I was 25. Only fools will count on Social Security and Medicare in their retirement planning...
Posted by: The Hype | Aug 27, 2008 2:38:53 PM
According to the CBO, the Social Security trust fund will be exhausted in 2049 if nothing is changed. 2049. After that only 80% can be paid out. That means, assuming NOTHING is done, boomers will see the end of their SS benefits for sure. And in no way shape or form will Social Security "not be there" unless it's killed by the Congress.
The CBO estimate is pretty conservative too. As soon as those tax cuts for the wealthy kick in and super-charge our economy (LOL) we should be good until everyone alive now is dead. Really though, small fixes now could push the 80% payout date further.
I'm a little worried about the Medicare change. Unless something is done with universal healthcare, I can forsee a lot of seniors without access healthcare at a time when they need it badly.
Posted by: Money Lady | Sep 6, 2008 4:51:46 PM
Today's social security dollars are used for today's retirees. The issue is that there won't be enough workers for the number of retirees coming up. People, there's no doubt, there will be change. It's time to step up and take control of your financial future. The only one who is really going to look out for you is you.