US - Increasing the normal retirement age in the US to 68 has been flagged up as part of the solution to addressing long term social security solvency.
Relaying the effects of the Liebman-MacGuineas-Samwick (LMS) Proposal, created by Jeffrey Liebman, Maya MacGuineas and Andrew Samwick, the Congressional Budget Office (CBO) said it would also reduce traditional social security retirement benefits, increase revenues, and create a new system of individual accounts.
In a letter addressed to Congressman Jim Kolbe, CBO acting director, Donald Marron (pictured), said the proposal would reduce traditional social security retirement benefits through adjustments to the benefit formula and see an increase to 68 in the normal retirement age while also increasing the earliest eligibility age from 62 to 65 and create a “lower earner supplement”.
Total benefits received by participants, including payouts from individual accounts, would be slightly lower than under current law until about 2035, the CBO claimed. However they would then equalise to current-law benefits until 2052, which under current law is the same year trust funds will become exhausted.
After 2052, the CBO projects total benefits under the LMS proposal would be “substantially higher” under the proposal. The trust funds would become exhausted in 2089 under the proposal, but total benefits would remain substantially higher under current law throughout the 100 year projection period (through to 2105).
The current LMS proposal has not been introduced to the government in the form of a bill and the CBO made its projections using the 2004 Social Security trustees’ demographic assumptions and its own January 2005 economic assumptions.
By Daniel Flatt
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