As the Social Security trust fund is expected to reach insolvency in just nine years, the idea of raising the retirement age is once again being discussed by leaders in Washington. Debates surrounding the program have made headlines for decades but now have renewed energy as this consequential benchmark draws near.
Most recently, in March 2024 the Republican Study Committee released a budget proposal that called for “modest” changes to the retirement age, without providing a specific age number.
Meanwhile, at the conservative Heritage Foundation, Senior Research Fellow and Project 2025 contributor Rachel Greszler has argued that “policymakers should gradually increase the normal retirement age from 67 to 69 or 70—moving the age up by one or two months per year—and index it to life expectancy.”
Origins
The Social Security Act was signed in 1935 by President Franklin D. Roosevelt. The program is best known for its provision of retirement benefits, which are available beginning at the age of 62, and workers must have paid into the system for at least 10 years, or 40 fiscal quarters, to qualify.
At the time the Social Security Act was enacted, Americans’ average life expectancy was 59.9 years for men and 63.9 for women in the United States. The program is largely funded by payroll taxes.
However, life expectancy in the country has grown considerably, with the average life expectancy in 2023 being 78.4, about 16.5 years longer.
Concerns over the program’s solvency have grown as more Americans rely on Social Security for a longer amount of time. Longer lifespans have also led Morningstar to recently revise the recommended 4% annual withdrawal rate for retirees down to 3.7%, in order make retirement savings last longer.
Further stress is expected to be added the program by the recently-passed Social Security Fairness Act. The Act repealed the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP). Originally enacted by Presidents Carter and Reagan to improve Social Security’s financial health, these provisions had previously reduced the Social Security benefits of certain employees, such as teachers, police officers and firefighters in many states, who were not required to pay Social Security taxes.
Combined, these repealed provisions reduced the benefits of over 3.2 million people, who will receive an additional $360 per month, on average, while spousal beneficiaries would receive an average monthly increase of $700 to $1,190.
A September 2024 Congressional Budget Office report found that the implementation of the change to the law will cost $195.7 billion over the next decade, and that it could further accelerate the timeline for Social Security’s insolvency, which is currently projected to take place in 2034.
Raising the retirement age has long been discussed as a potential method to make Social Security more viable, but it has never been implemented. Some of those keeping score, such as Eric Ludwig, program director of the Retirement Income Certified Professional (RICP) Program at the American College of Financial Services, believe it to be a sound solution.
Ludwig recently explained to Kiplinger that “Social Security was never meant to fund 30 years of retirement, so it makes sense that the full retirement age increases with time. That's why we need to focus on expanding lifetime income options in retirement savings plans to give Americans more flexibility in how they create sustainable retirement income.”
However, others argue that it would force people to either work longer or receive fewer benefits.
In a September 2024 letter, the Congressional Budget Office projected that raising the retirement age to 69 “For people born in the 1970s, ... the average retirement benefits for workers who claimed benefits at age 65 would be 13 percent less than the average benefits they would receive under current law.”
The reduction in benefits would have a greater impact on younger workers, as the higher retirement age would lead to a 2% overall average lifetime reduction in benefits for those born in the 1960s while leading to an 8% average reduction for people born in the 1970s or 1980s.
Raising the retirement age has also led to questions of equity between white-collar and blue-collar workers with more physically demanding jobs.
As Boston College’s Center for Retirement Research noted, many blue-collar workers are simply “less physically able to remain in their jobs,” due to the demands of their work and the effects of age. Ludwig acknowledged that “We're essentially telling construction workers, nurses, and factory workers they need to keep lifting, bending, and standing for an extra two years,” adding that “the cruel irony is that these are often the same workers who have shorter life expectancies and would collect benefits for fewer years anyway.”
While often viewed as a political third rail, Social Security has been subject to reform before. In 1983, reforms gradually raised the retirement age and increased payroll taxes, which according to the Peterson Institute, was successful, allowing the program to enjoy surpluses from 1984 until 2009.
At present, the CBO projects that the program’s funds will be depleted by 2034, which is a mere nine years away, so expect plenty more talk and action on this issue beginning in 2025.
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