personal finance

US seniors face benefits being slashed by 20 percent if Retirement Age raised

Experts are warning that any potential increase to the Full Retirement Age (FRA) would result in benefit payments being slashed by 20 percent.

This comes amid ongoing debate among politicians in the US about how to stop Social Security from being insolvent.

Currently, the FRA is 67 years old but Americans are able to access Social Security benefits from as young as 62, albeit at a reduced rate.

Anyone aged 65 or over are eligible for Medicare Benefits as long as they have paid the associated taxes for at least a decade.

Workers sometimes decide to postpone their retirement from 67 to 70 in order to boost the amount they can claim from Social Security.

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Speaking to , senior tax account Wayne Bechtol from sounded the alarm about the dangers posed to seniors by the potential move to raise the Retirement Age.

He explained: “The change would introduce an immediate 20 percent benefit cut across the board.

“So, for example, people retiring at 62 (the earliest eligible age) will experience a 43 percent cut in their full benefits.

“Say, a $1,000 (£792.46) worth of benefit would reduce to $570 (£451.70).”

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According to the tax expert, the pending changes would not immediately affect those approaching retirement or current claimants of Social Security benefits.

However, the Republican Study Committee Budget has previously proposed to raise the retirement age of those born after 1978 to 70 years.

According to the accountant, a move to raise the FRA to 70 will have unnecessary tax consequences for workers.

Mr Bechtol added: “This change in the retirement age can cause payroll tax changes, leading to wealth inequality.

“Lenders can face issues like tough trade-offs as the debt ceiling looms ahead.”

The last time the FRA was changed was nearly 40 years ago when it was pushed up to 67 in 1983.

At that time, the benefit cut levied on beneficiaries was at five percent which is significantly less than the forecast reduction if the Retirement Age is hiked once more.

As well as this, Mr Bechtol warned that any changes in the Retirement Age would lead to other pension thresholds having to be altered also.

The tax expert said: “The higher the retirement age, the higher the cut in the benefit regarding receiving social security.

“The change in the retirement age will necessitate a change in forwarding the Early Eligibility Age (EEA).

“As a result, people retiring at 62 will not receive old-age pensions. However, if the EEA remains unchanged, the benefits could be reduced drastically for people retiring at 62.

“People can argue that they can work longer. But statistics show that only two-thirds of people above 65 are gainfully employed. The situation can worsen if the age is raised.”


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