As most (if not all) retirees or those approaching retirement will have heard by now, a major trust fund used to pay benefits is projected to become insolvent in less than a decade from now if no change is enacted to the program soon. Lawmakers have since been debating potential solutions to prevent the shortfall, however, nothing has been decided yet.
Recently, word had been spreading that raising the Full Retirement Age again was under consideration, and during a recent interview with Fox Business, SSA Commissioner Frank Bisignano stated that, “everything’s being considered,” with the implication being that raising the Full Retirement Age might be considered. Later that same day, however, Commissioner Bisignano shared a post on social media platform X, clarifying that the raising Full Retirement Age is not under consideration.
Here is everything you need to know about the projected shortfall and the Full Retirement Age.
Projected shortfall
The Social Security program is primarily funded through the contributions working individuals make into the dedicated Social Security payroll tax. This revenue is also supplemented by two major trust funds: the Old Age and Survivors Insurance (OASI) trust fund, and the Disability Insurance (DI) trust fund. In recent years, the number of retirees claiming benefits have been growing significantly faster than the number of working individuals paying into the dedicated payroll tax. As a result, the program has had to rely more and more on revenue from its trust funds to ensure all benefits are paid.
Consequently, the OASI trust fund is now on the road to insolvency, with the Board of Trustees estimating that this trust fund will be emptied by 2033. In the event of this shortfall, an automatic 23% cut to benefits will be triggered. The Trustees also posed to possibility of combining both funds into one OASDI trust fund. According to the annual report, “the resulting projected fund (designated OASDI) would be able to pay 100 percent of total scheduled benefits until 2034, one year earlier than reported last year. At that time, the projected fund’s reserves would become depleted, and continuing total fund income would be sufficient to pay 81 percent of scheduled benefits.”
In short, regardless of whether the trust funds are combined or not, if Congress does not intervene in the present, benefits will be hit with an automatic cut.
Full Retirement Age
Generally speaking, the retirement age for most is 65, and when the Social Security program was first introduced, the Full Retirement Age (FRA) was indeed 65 years of age. While Social Security can be claimed from age 62, your FRA is the age at which you qualify to receive your full benefits (i.e. claiming before FRA results in a benefit reduction of up to 30%).
In 1983, the program was amended and it was decided that the FRA would be gradually increased in two month increments until it reached 67 years of age, and this will occur in 2026. The decision to gradually increase the FRA was made in order to maintain the financial health of the program as life expectancy grew. Subsequently, with the news of the projected shortfall, raising the FRA again had been brought up when solutions were being debated by lawmakers.
In a recent Fox Business interview, SSA Commissioner Frank Bisignano stated the following when asked if the FRA would be raised: “I think everything’s being considered, will be considered.”
“Remember, most people told you and I Social Security wasn’t going to be around, and it’s going to be around. And so the generations that are coming in will probably have a different set of rules than we had,” Bisignano added.
Before the day was up, however, Bisignano shared a post on X, clarifying that raising the FRA is not on the table. His post read as follows: “Let me be clear: President Trump and I will always protect, and never cut, Social Security… Raising the retirement age is not under consideration.”