Raising the Retirement Age

In Social Security history, the age at which a worker can claim full benefits has increased only once—in 1983. The rise from age 65 to 67 was phased in over more than 20 years. As things currently stand, those born in 1937 or earlier get their full due at age 65, everyone born in 1960 or later can't claim full benefits until 67, and employees between those years can find their full retirement age here.

The American Academy of Actuaries says it's time to raise the retirement age again to keep up with ever increasing life expectancies. In 1940, men who reached age 65 typically lived 12 years in retirement and women just over 13 years. In 2007, those ranges were almost 17 years and 19 years, respectively. And Social Security Administration actuaries predict that life expectancy at age 65 could further increase to almost 19 years for men and 21 years for women by 2040—which is seven to eight more years of retirement that will need to be financed.

Additionally, business columnist Scott Burns is predicting a big increase in Social Security payouts next year to keep up with inflation. Last year, Social Security checks rose by 2.3 percent. But Burns calculates that payments will be almost 6 percent larger next year.

"To be more precise, it will be 5.7 percent if the summer holds no inflation. That means if the consumer price index doesn't budge for July, August, and September. The benefit increase will be 6.1 percent if inflation runs at the 0.2 percent 'core' rate for the same period. And it will be more if inflation is higher than the core rate. The last time there was a larger increase was 1982, when it clocked in at 7.4 percent," Burns wrote in his syndicated column.

At a time when workers' wages are increasing at about 3 percent a year, Burns concludes, "it's beginning to look like the best way to get a good raise is to retire." But if you're not yet age 70, waiting to sign up for Social Security—which increases annual benefits by 7 to 8 percent for each year you delay claiming—may provide the biggest raise of all for many healthy adults.

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