Old-Age & Survivors Insurance Trust Fund (OASI) and the Social Security system are fundamental pillars of the social welfare framework in the United States. However, concern about the possible depletion of their trust funds by 2033 has been a recurring theme in the public debate.
But what will be the consequences of the Social Security and OASI trust funds running out? The first thing that would happen is that the program’s ability to pay full benefits would be severely compromised. According to the Social Security Administration (SSA), in such a scenario, the program could only be paid about 76% of the scheduled benefits starting from the year the funds run out, that is, 2033, according to the Social Security trustees.
This would imply an immediate and significant reduction in the income of millions of retirees, disabled and surviving beneficiaries. But this is not all: with the reduction of funds, and their consequent reduction in payments sent to beneficiaries, low-income beneficiaries would suffer, but there would also be a problem for those who are waiting to retire, if one more thing happens that until now was not being considered.
Retirement Age Change in the United States: It could be increased soon
In recent months, many elderly citizens have expressed their concern about the planned changes in Social Security. This feeling of unease is justified given the current context of possible modifications, decreases in payments and a potential financing crisis.
According to the most recent reports, a new retirement age is being considered in the United States, which would imply changes with strong impacts for those who are thinking about retiring soon.
The current proposal, developed by experts in Social Security and retirement, suggests that the retirement age should be increased progressively and not all at once. If this idea comes to fruition in the near future, retirees would have to wait at least another year (if not to start receiving their Social Security payments. This measure seeks to prevent the bankruptcy of the system and increase payroll and income tax revenues. The changes would affect the early retirement age (62 years), the full retirement age (67 years) and the late retirement age (70 years), the result of longer and more intense working hours.
Despite being one of the most robust programs in the United States, Social Security faces serious long-term financial complications. The program’s expenses are growing at a faster rate than its income. The massive retirement of the baby boomer generation over the next 20 years will significantly increase these expenses. The Social Security system, which relies on contributions from current workers to fund retirements, will come under considerable pressure.
Workers in Physically Demanding Professions, the Most Affected
Raising the retirement age could have disproportionate consequences for workers in physically demanding professions and those with low wages, who tend to have a lower-than-average life expectancy. These workers could face significant reductions in their benefits.
Furthermore, a high retirement age may be unattainable for some employees in physically severe jobs. To mitigate these impacts, adjustments to the disability regulations are proposed, offering support to those employees who become unable to perform their tasks after a certain age.
In 1983, Congress passed a law that progressively increased the retirement age for receiving full Social Security benefits. Although early retirement benefits are still available at age 62, they will be reduced further under the new proposal.