There's no doubt about it -- Social Security is running out of money. According to the latest projections, the Social Security trust funds are expected to be depleted by 2034, at which point the incoming payroll taxes will be able to support just three-fourths of promised benefits. So, something will need to be done to fix Social Security, and there are several options on the table, including higher taxes, lower benefits, and yes, a higher retirement age. How much of an increase could happen, and how likely is it?
There have been a few proposals to raise the retirement age
If you're following the presidential election drama, you've undoubtedly heard some Social Security solutions from the various candidates. Some of the solutions from the republican side have to do with raising the retirement age to either 68 or 70 (the current full retirement age is 67 for people born after 1960).
The candidates who have been specifically pushing retirement age increases have dropped out of the race at this point (Christie and Bush). Ted Cruz has included a retirement age increase in his discussions of saving Social Security, but he hasn't mentioned a specific age or how it might be phased in. Just for comparison's sake, the latest increase in the Social Security retirement age, from 65 to 67, is currently in the process of being phased in over a 22-year period.
Finally, it's important to mention that none of the candidates -- or other politicians, for that matter -- want to raise the retirement age for older Americans, which is generally defined as workers over age 50. So, if you're in your 50s or 60s, it's pretty safe to say your full retirement age isn't going to change.
Not the most popular plan
Here's the good news: Raising the retirement age is not only one of the most unpopular ways to fix Social Security, but it's also one of the least effective.
A study by the National Academy of Social Insurance (NASI) and Greenwald & Associates shows that a gradual increase in the full retirement age to 68 would only fix 16% of the projected funding shortfall. Even a gradual increase to 70 would only close 25% of the gap.
Other solutions are projected to be far more effective. For example, eliminating the cap on earnings subject to Social Security taxes would cover nearly three-fourths of the shortfall. Or, gradually increasing the Social Security tax rate from 6.2% to 7.2% would eliminate 52% of the funding gap.
Both of these solutions are extremely popular among Americans in all income groups. Increasing the tax to 7.2% is the most popular option, favored by 83% of Americans. Eliminating the wage cap is right behind it, with 80% support.
On the other hand, any solution that involves cutting benefits is rather unpopular among the American public, and raising the retirement age is a form of a benefit cut. The study also showed that only 35% favor even a small increase in the full retirement age to 68, and an increase to 70 is even less popular.
So, should you worry?
It's impossible to say for certain, but I would expect any increase in the retirement age to be relatively small (to 68) and gradual -- meaning it will be phased in over several years or decades. And, like I pointed out, nobody is talking about raising the retirement age for people currently over 50.
Additionally, even though there are some proposals to raise the retirement age being discussed by various presidential candidates, take them with a grain of salt. Changes in Social Security have to go through Congress, and any president is unlikely to completely get his or her way on this matter.
The bottom line is that while an increase in the retirement age is indeed possible if you're relatively young, there are several other fixes that are more popular with the American people and, therefore, more likely to gain political traction.