How seniors could be affected by an increase to the retirement age

Some see an increase to retirement age as a natural progression, but near-retirees could struggle, experts say

As lawmakers once again consider increasing the retirement age in an effort to bolster the Social Security trust fund, experts are noting the potential positives and negatives of the move, according to a contributor article for Forbes.

Emily C. Rassam, a senior financial planner at Archer Investment Management, told Forbes that the key advantage of raising the retirement age would be keeping the trust fund solvent for longer.

“There are several potential ways to fix the Social Security system. In short, they involve increasing revenue or decreasing distributions,” Rassam said. “If the normal retirement age increases again, it will decrease total lifetime payouts for retirees, especially those who start collecting income early.”

There could also be a “reset” in the minds of younger Americans as they align the idea of a growing life expectancy with a new retirement savings standard, according to Clint McCalla, a senior wealth manager at LourdMurray.

“If you examine the practical implications of living longer, that means you need to save more than prior generations,” McCalla told Forbes. “By raising the retirement age, you are aligning with this new reality and setting the new standard. Those that can afford to retire will continue to have that option.”

Raising the retirement age would be a harder sell to today’s seniors, particularly those at or near retirement, according to Robert Reilly, a finance faculty member at the Providence College School of Business and financial advisor at PRW Wealth Management.

“Those against the raising of the retirement age say that any extension is a clear benefit cut and a broken promise on the part of their government,” Reilly told Forbes. “[T]he flexible option of retiring with reduced benefits at age 62 could be eliminated. There is quite a bit of debate as to whether the US population’s average mortality rate is on the rise or waning. Many retirees may not feel that they will have many golden years in their late 60s, never mind into their 70s.”

As with most seniors, reverse mortgage borrowers often rely on Social Security benefits as part of their monthly retirement cash flow. When inflation began to impact living costs in 2021, the reverse mortgage industry welcomed an increase in benefit payments, but did not see a change in the product’s value proposition.

“When roughly half of Americans say they don’t have enough saved to maintain their standard of living once they stop working, and with one in three seniors having less than $5,000 saved or no savings at all, utilizing their home equity could be a key a solution,” said Paul Fiore, then-CMO of American Advisors Group (AAG), in 2021. “A reverse mortgage remains an important element in retirement strategies, especially when you look at how eliminating a monthly mortgage payment could affect the average cost of living.”

Harlan Accola, now with Movement Mortgage, said at the time that Social Security benefits remain only a part of the solution for seniors — as opposed to the full retirement plan.

“We are using this story to explain that Social Security will simply not be the answer, as evidenced by the fact that even a 5.9% ‘gigantic’ raise will do very little to impact [the lives of seniors],” Accola said in 2021 regarding the cost of living adjustment for program beneficiaries. “They need a much bigger lifeline.”

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