A new proposal from the Republican Study Committee in the House could drastically affect millions of Americans who depend on Social Security for their retirement. The plan suggests raising the full retirement age (FRA) to 69 by 2033, which would impact many individuals currently between the ages of 30 and 55. Here’s how this potential change could affect your retirement plans and benefits.
How the Proposed Change Could Impact You
If the FRA is raised to 69, Americans between 30 and 55 years old today could lose around $420,000 in lifetime Social Security benefits. According to the Congressional Budget Office, this estimate factors in long-term impacts such as inflation and economic factors. Those affected by this change could see their annual benefits reduced by about $3,500, which adds up to a 13% annual cut during their retirement years.
While the average reduction will be around $3,500 per year, some people may lose more, while others may lose less, depending on various factors like their individual retirement plans and the age at which they start claiming Social Security.
The Timeline for Change
The proposed changes would begin in 2026, with the FRA slowly rising to 69 by 2033 over the course of just eight years. This is much quicker than the last significant change in 1983, when the FRA was raised from 65 to 67, but the shift took 33 years to complete. If passed, the new plan would impact a large portion of Americans, with an estimated 257 million people being affected by the increase in the FRA.
The Hardest Hit: Workers in Physically Demanding Jobs
The change would hit the hardest for individuals working in physically demanding fields like construction, healthcare, and service industries. These workers often rely heavily on Social Security for financial support in retirement, but many of them are unable to work into their late 60s due to the physical toll their jobs take on their bodies. As a result, some of these workers may be forced to rely on Social Security Disability Insurance (SSDI) instead of regular retirement benefits, which could overburden the SSDI system.
How Will This Affect Social Security’s Finances?
While raising the FRA would reduce the amount of money Americans receive in Social Security benefits, it would only slightly delay the Social Security Administration’s (SSA) financial problems. The SSA’s trust funds are projected to be depleted by 2034, but this change would only push that date to 2035. So, while the plan might help stretch out the funds, it doesn’t fully solve the issue of long-term sustainability.
How to Prepare for Lower Social Security Benefits
In light of these potential changes, financial planners are advising Americans to take proactive steps to secure their financial futures. Here are a few strategies to consider:
- Recalculate Your Retirement Savings – Americans nearing retirement should adjust their savings expectations based on the possibility that their Social Security benefits could be lower.
- Increase 401(k) Contributions – Consider bumping up your 401(k) savings by 2-3% to compensate for potential Social Security cuts.
- Explore Other Investment Options – Experts also suggest using Roth IRAs, Health Savings Accounts (HSAs), and other investment vehicles to supplement Social Security and build a more robust retirement plan.
Other Social Security Changes on the Horizon
As the debate over the FRA continues, there are other significant changes to Social Security in the works. Employees of the Social Security Administration (SSA) have warned of massive delays due to four major changes, which could impact millions of checks. Additionally, another “massive” change could affect 400,000 people daily and is expected to be completed this year.
The proposed increase in the full retirement age is a significant shift that will affect millions of Americans who rely on Social Security for their retirement. While the goal is to extend the financial stability of Social Security, it comes at a cost for those who would see their benefits reduced. It’s important to start planning now and take steps to ensure your financial future is secure, even if these changes go into effect.
