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Removing the Social Security age 70 cap

Many people approaching retirement who've suffered COVID-induced unemployment, and even those who've still been able to work during the pandemic, may all have concerns about the state of their retirement finances. For those individuals whose health is still good enough to continue working for however long past age 70, the Social Security age 70 cap needs to be removed immediately, in order for workers to try to restore or strengthen their finances for retirement.

 

Under current law, any worker who works past their full retirement age will accrued an 8% increase per annum in their Social Security benefit until 70. If my math is correct, this means that if a worker reaches their full retirement age at 67, and they continue to work until 70, through the power of compounding, their Social Security benefit will increase 26%. But if they could work for an additional year past that, their benefit goes up to 36%, and if they can go for still another year until age 72, the benefit goes up to 47%, so you get the picture.

 

To remove this cap, you'll need to contact your Congressperson, both of your Senators, and President Biden. If you aren't sure who your Congressperson is, google the U.S. House of Representatives and where applicable, type in your address. If you aren't sure who your Senators are, google the U.S. Senate and you'll find which Senators represent your state. To leave a message for the President, google the White House. 

 

When you go to the websites of your Congressperson and Senators, you'll want to fill in the message boards and at the same time, note the phone numbers of their Washington D.C. (not local) offices, since your chances of talking to a live staff person are better there than when contacting their local offices. The White House website will have a message board too.

 

Legislative change can be a slow, grinding process, so the sooner a sufficient number of people start contacting the politicians, the sooner the change will occur. Thanks for reading.

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@JeffreyF932786 

I believe you need to develop actuarial studies to support extending delayed retirement credits beyond age 70. As you may or may not recall, the SS Trust was almost depleted by 1983. So, an amendment was implemented in 1983 to accumulate money (to be invested in Special Treasury bonds) and build a surplus which is almost $3 Trillion currently. This surplus is what the actuary is projecting to be depleted by about 2035. Thereafter, any FICA taxes received will be simply reissued to SS beneficiaries/payees. This is estimated to pay only about 75% of current monthly benefits. I will say with strong conviction that job number 1 for Congress is to develop a solution to fund SS benefits and Medicare as well. Once that is done, they may review the provisions governing Delayed Retirement Credits which is not a front burner project.

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People can currently work beyond age 70. And if the wages work out correctly they might even have their benefit increased, since this is based on their highest 35 years of (factored) income.

 

But I guess you're saying that the current rules permit accumulation of delayed retirement credits (DRC) up to age 70 and that you think this age should be increased with continued accrual of DRCs. I suppose that might work. Although my own reading shows that few people wait until 70 to collect their retirement benefit, so it might be that there would be few takers for this age increase. I even see that here in this AARP forum that people want to get their SS ASAP.

 

The concept hasn't been ignored though. With the current Full Retirement Age maxing out at 67 years, that leaves only 3 years to accumulate DRCs. It seems that the work done to increase the FRA didn't really consider that perhaps the maximum age to gain DRCs should be increased as well...and for the very same rationale that the FRA was increased to 67. Or perhaps the Congressional researchers did investigate this issue but tabled it.

 

One minor quibble with your analysis. The DRCs are not compounded. They accumulate monthly but are not compounded. For my own case, my FRA is 66. I am older than that now and plan to wait until I am 70 (mostly for the survivors benefit due to my wife/widow). My benefit at 70 will be 1.32 times my PIA; with the 1.32 factor considering four years' worth of the 8% DRC. I have confirmed this numerous times at different sources, including the SSA's Anypia32.exe benefit calculator. If I wasn't so sleepy I would look this up in the SS rules but I think comments on how the DRCs are applied should be easy to find.    well, I just Googled and found this AARP article https://www.aarp.org/retirement/social-security/questions-answers/delayed-retirement-credits.html, which says:

 

"For every month from your FRA until age 70 that you postpone filing for benefits, Social Security increases your eventual benefit by two-thirds of 1 percent — a total of 8 percent for each year you wait. For example, wage earners who reach full retirement age at 67 but delay claiming benefits until 70 will get an extra 24 percent tacked on to their monthly payment."  Note the extra 24 percent, not a compounded 8%.

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@fffred 

You are correct. Many people do not delay SS benefits to obtain Delayed Retirement Credits. The reasons will vary from person to person. However, the math does not make it attractive unless you believe you will live beyond average life expectancy. First, the SSA informs us that starting SS benefits early, at Full Retirement Age (FRA) or delayed are actuarial equivalents. This means that based on average life expectancy and the SS internal rate of return, you will receive the same amount over your lifetime. Second, many people believe they are receiving an 8% return per year on their money if they delay. They are not. This believe may come from a concept that we have a Social Security Account such as an IRA. As you know, nobody has a SS account that earns interest. The 8% per year DRC is more of an actuarial adjustment for accepting no payment after attaining FRA. The DRC is an approach that  makes up over time the present value of SS benefits not received. The SSA does not indicate their discount rate to develop the present value calculations. However, I have used 3% and am in the ballpark. In fact, I am in the diamond. So, if your internal rate of return is greater than 3%, you are better off starting SS at FRA and investing that money. Your combined SS and investment returns will be greater than the SS program for both you and your spouse. FYI, the survivor benefit is, in effect, a death benefit that only pays a monthly benefit. Have you compared the survivor benefits versus life insurance? As you probably know, life insurance will provide a provision for a lump sum payment as well as naming another beneficiary should you spouse die before you.

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