US - Republican Senator Chuck Hagel has proposed raising the social security retirement age from 67 to 68 and cutting benefits for workers who retire early to make the system solvent for future generations.
In his Bill, he has suggested the full benefit retirement age be lifted one year – from 67 to 68 – and that those who retire early receive only 63% of their full retirement benefits, rather than the present 70%.
In addition, he proposes adding life expectancy as a third component to social security benefit calculations, which are currently calculated using average income over 35 years and the wage index. The early retirement age would remain at 62.
Hagel said social security benefit calculations had never been adjusted to reflect increased life expectancy.
“By factoring life expectancy into the base benefit calculation, the rate of increase in benefit payments will be slowed,” he said. “No other changes will be made to the annual Consumer Price Indexing of benefit increases.
“In addition to making social security solvent, these adjustments can help us confront the challenges of increasing Medicare costs and shortages in the workforce. It is important to protect the option of early retirement, but our laws need to encourage individuals to stay in the work force, not leave it.”
The changes in social security would be paid for using the existing US$3.7trn unfunded liability to ensure the long-term health of the system, Hagel said.
“Doing nothing will mean that at the end of 75 years, social security will have chewed up US$3.7trn tax payer dollars to keep social security solvent and we will still have an insolvent programme with trillions of dollars more of unfunded liabilities staring us in the face,” he said.
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