In the context of Social Security, the retirement age has become a hot topic as of late, with many wondering if the Full Retirement Age will be raised higher than 67 in the near future. Generally speaking, the commonly agreed upon retirement age for most working individuals is 65 years of age. With regards to the Social Security program, however, the retirement age varies somewhat.
If a worker earned enough work credits throughout their career by paying into the dedicated Social Security payroll tax, they will later become eligible to claim their retirement benefits from the Social Security Administration (SSA). Benefits can be claimed starting at age 62, however, this will be considered as claiming early and as a result, the benefit will be subject to a reduction of up to 30% which is permanent. This is because the Full Retirement Age (which is the age at which one becomes eligible to claim their full benefits) is currently 66-67 years of age.
A recent survey found that a very small percentage of adults could correctly identify their Full Retirement Age. As such, the House Ways and Means Committee advanced the Claiming Age Clarity Act earlier this month. Here is what you need to know.
What is the Claiming Age Clarity Act?
The age at which you begin to claim benefits from the SSA plays a rather major role in the calculation used to determine exactly how much you will be seeing on your monthly benefit checks. Experts have, however, shared that the terminology currently used by the agency is not particular helpful in clearing up the confusing felt by people when they try to understand the trade-offs that come with claiming at various ages.
The Nationwide Retirement Institute recently surveyed over 1,800 people, and of this cohort, a mere 21% could “correctly identify the age at which they qualify for full Social Security benefits.” Subsequently during September, the House Ways and Means Committee advanced the Claiming Age Clarity Act, aimed at making claiming language “substantially clearer”. The bipartisan bill was advanced in a 41 to 1 vote, and a version of this bill has also been proposed in the Senate.
Proposed changes under the Claiming Age Clarity Act
As things currently stand, if you claim at age 62 (or any time before Full Retirement Age), you will be locked into a reduced benefit amount. At most, benefits can be reduced by 30%, and this is determined in relation to the number of months between the age at which you claim and the full retirement age. Parallel to this, if you delay claiming until you are 70, you can receive up to 124% of your full benefit.
As such, the Claiming Age Clarity Act aims to change the language used by the agency regarding the matter of retirement age to allow for clearer understanding. Listed below are the proposed changes:
- Age 62 which is currently the “early eligibility age” will become the “minimum benefit age” thereby clarifying that benefits will be reduced if claimed at this age.
- The “full retirement age” which is the age at which one is eligible for their full benefits will become the “standard benefit age.”
- Age 70 which allows for higher benefits is currently referred to as “delayed retirement age” but will become the “maximum benefit age.”
“Calling age 62 the “early eligibility age” conveys you can start benefits then, but it says nothing about what that benefit is going to look like,” explained Emerson Sprick, director of retirement and labor policy at the Bipartisan Policy Center.
“By instead calling that milestone “minimum monthly benefit age,” that better communicates the implications for the monthly payments those beneficiaries will receive,” Sprick added. “There’s evidence that it would have real effects on claiming behavior, and that will have real effects on folks’ financial security throughout retirement for the rest of their lives after they claim.”