Raising the Retirement Age to 69 Could Force Millions to Claim Social Security Early, and Lock in Smaller Checks

Social Security is facing a serious financial challenge that could soon come to a head. And it boils down to a shrinking labor force.

Social Security gets most of its revenue from payroll taxes. But as baby boomers exit the workforce and start claiming benefits, there won’t be enough incoming wage-earners to replace them. Once Social Security’s trust funds run dry, benefits could face substantial cuts.

In fact, if Congress doesn’t act, Social Security recipients could face an automatic benefit cut of roughly 22% as early as 2032, according to recent projections. That’s a scenario many lawmakers want to avoid.

There are several ways Congress can strengthen Social Security’s finances. Options include increasing payroll taxes, raising or eliminating the wage cap for Social Security tax purposes, or changing the program’s eligibility rules.

One proposal that’s received attention is raising Social Security’s full retirement age (FRA) from 67 to 69. While that change could improve the program’s financial outlook, it could also leave millions of future retirees with an unpleasant choice — claim benefits early and accept permanently reduced monthly checks, or work longer than  planned.

A higher FRA could improve Social Security’s finances

FRA is when you’re entitled to your full monthly Social Security retirement benefit based on your earnings history. For anyone born in 1960 or later, that age is currently 67.

You can claim Social Security as early as age 62, but doing so reduces your monthly benefit for life. On the other hand, if you wait beyond FRA, your benefit grows through delayed retirement credits until age 70.

If Congress raises Social Security’s FRA to 69, it would effectively reduce lifetime benefits for many future retirees. People who continue claiming at 67 would face a reduction, which would save Social Security money.

Plus, raising FRA would likely keep many workers in the labor force longer. That means they’d continue to pay taxes on their wages, allowing Social Security to receive extra funding and help the program keep up with benefit payments.

Workers could end up in a tough spot

Raising FRA might help Social Security, but it could put workers in a very difficult position. At that point, workers might have to either accept smaller checks for life or delay retirement despite wanting to end their careers earlier.

Now for many office workers, extending a career by a couple of years may be inconvenient but manageable. But for people with physically demanding jobs, it’s a much bigger issue.

Construction workers, warehouse employees, and others whose jobs require lifting, standing for long hours, or repetitive physical activity may simply not be able to continue working until age 69. Health problems or the physical demands of the job could force them to leave the workforce earlier than planned, making an early Social Security claim their only realistic option.

It’s also worth remembering that life expectancy and health vary widely across income levels and occupations. Asking all workers to remain in the labor force longer affects people differently, depending on their health, financial resources, and the type of work they do.

Congress has to act — and soon

Raising FRA for Social Security clearly has drawbacks, and at this point, it’s just a proposal. Congress has not approved such a change, and lawmakers have other options for improving Social Security’s finances.

But one thing is becoming increasingly clear — doing nothing won’t fly. With projected benefit cuts looming, Congress will almost certainly need to make changes to Social Security to preserve the program, even if those changes require difficult tradeoffs for future retirees.

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