Are Changes to Social Security Coming Soon?

America’s aging culture is burdening the country’s two primary old-age programs, Social Security and Medicare. Several Republicans are backing measures to modify the programs as they prepare for a retake of the House in November.

Social Security and Your Expenses
Social Security and Your Expenses

Senior Americans could face a five-year delay in claiming Medicare, the federal health care program for seniors that presently permits people to enter the program when they reach 65, according to a proposal by the Republican Study Committee. Moreover, the Social Security retirement age would be raised from 66 to 67 to 70 years old.

What’s the deal with the push?

According to the Republican Study Committee’s materials, the “miracle” of greater life expectancy. Even though Americans live longer lives than previous generations, the average retirement age is 61, or 5 years earlier than employees said they planned to leave the labor, according to Gallup. In other words, people may anticipate working longer, yet the average American is retiring five to six years earlier. Therefore they are retiring before reaching Social Security’s current full retirement age.

Retirement aspirations versus realities

As a result, raising the eligibility age for benefits will undoubtedly raise hardship and poverty for older Americans, particularly low-income, rural Americans and those who must quit working due to health difficulties or to care for family members, according to experts.

That means either missing out on three years of benefits compared to current retirees or deciding to claim benefits prematurely — something Social Security enables retirees to do — in return for a permanent reduction in payments. According to the Social Security Administration, a 20% reduction in monthly income results from retiring three years before full retirement age.

That implies that even if you work until you’re 70, you’ll never catch up with the loss in benefits, said Nancy Altman, head of Social Security Works, a benefit advocacy group.

It especially harms individuals in low-income, physically demanding occupations, she adds, who are more likely to cease working sooner owing to health difficulties.

A delay in Medicare eligibility would put older Americans underinsured and at risk of financial and health hardship, said Mary Johnson, a senior citizen advocacy group’s Social Security and Medicare policy analyst. She said it would require Americans aged 65 to 70 to work longer to maintain their employer-provided health insurance or turn to Healthcare.gov’s marketplace to purchase insurance. Even policies for persons under the age of 64 can be expensive, with premiums exceeding $10,000 per year.

The expense for individuals 65 to 70 would be significantly more financially difficult, especially considering the need to utilize more care and spend more out of pocket, she said. How will they pay for these new, unanticipated healthcare costs?

Shortages in funding

Republicans argue that Social Security and Medicare adjustments are required due to predicted budget problems, with the Social Security trust fund expected to be drained by 2035. Beneficiaries would still get monthly checks at that point, but their benefits would be reduced to around 75% to 80% of their full value. Medicare is likewise suffering budget difficulties as the country’s elderly population grows.

According to Republicans, the best way to re-establish the program is to reduce costs by restricting the number of years seniors may claim these benefits. They also want to tie the retirement age to future increases in life expectancy, which might imply that the eligibility age for Social Security would rise even higher than 70.

Most individuals don’t even work until they reach their full retirement age, let alone 70, Altman added. This would increase insecurity and exacerbate the retirement income dilemma. Experts warn that if Republicans obtain control of Congress, these and other proposals, such as making Social Security a discretionary spending program, are likely to come forward. As of Monday morning, Republicans are expected to regain the House.

President Biden opposes the proposals, but Democrats face headwinds as inflation is higher than it has been in the last thirty-nine years.

Life expectancy in red states

Experts predict Americans in Republican-leaning states would be hit more by the retirement age rise than those in so-called blue states.

This is because, depending on where one lives, there is a significant difference in life expectancy for those over the age of 65. Inhabitants of states where Republicans are more likely to be elected had shorter life expectancies at 65 than residents of areas where Democrats are more likely to be elected.

Mississippi, Alabama, and Oklahoma have the lowest life expectancy for people 65 and older, with those residents expected to live an additional 16 years. However, 65-year-olds in Hawaii live an extra 21 years, while those in California and Vermont live an extra 19.5 years.

Raising the retirement age would harm rural communities, which tend to be older, lower income, and Republican supporters, Altman added. As a result of the increase in Medicare’s eligibility age to 70, many low-income individuals may not be able to work in their 60s due to a disability or other reasons.

According to Altman, delaying Medicare accessibility could lead to higher healthcare costs since more people would enter the program later in life and be sicker after delaying treatments for several years.

Other Social Security Reforms

Experts believe there are alternatives to raising the retirement age and lowering benefits for bringing Social Security and Medicare to financial health.

Among them is lifting the Social Security tax threshold on incomes. Earnings above $147,000 are currently exempt from the payroll tax (though this limit will rise to $160,200 in 2023). Another option is to raise the program’s tax rate.

Both strategies would increase program income, but the first would affect only approximately 6% of workers earning more than $147,000 per year. In contrast, according to a June analysis from the Congressional Research Service, the second would affect all workers. (In 2023, the earnings ceiling will be raised to $160,200, increasing the amount to account for inflation.)

From a political standpoint, public opinion regarding various options can vary across constituencies, according to the CRS report.

Research indicates that lawmakers must act swiftly to prevent a reduction in payments for the nearly 70 million Social Security recipients, including retirees, handicapped workers, and survivors.

However, raising the retirement age and making Medicare inaccessible until people reach the age of 70 may exacerbate income inequality and worsen poverty among America’s seniors, according to Altman. “Right now, this is a significant threat,” she said.

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