By ALICE ANN LOVE
The Associated Press
WASHINGTON - A long-scheduled increase in Social Security retirement
age, from 65 to 67, will start having its first impact on Americans
next year, although many don't know it yet.
Don Blandin, President of the
American Savings Education Council, said people: attending retirement
seminars he conducts across the country are shocked when he tells them
they won't be eligible for full Social Security benefits at age 65.
"I go through that and hear a lot of gasps in the room,” said
Blandin. As a result many
people may be underestimating how much they need to save on their own
if they want to retire in their early 60’s, he said.
A poll of Americans over age 25, taken this year by the Employee
Benefit Research Institute, found that almost six in 10 think they
will be eligible for Social Security benefits before they actually
will be.
Retirement age rises: Ready
or not, the normal Social Security eligibility age will begin creeping
up next year until it eventually reaches 67 for those born in 1960 or
later. Also, taking early
retirement at age 62 will become less of a good deal.
The changes will initially affect people born in 1938, who turn
62 in 2000 and become eligible for Social Security’s early
retirement option.
Those people can still choose to collect reduced Social Security
benefits next year. If they did, however, their
early-retirement-benefit would be slightly less than in the past - 20
5/6 percent less than it would be if they wait to retire until the
usual retirement age, rather than the 20 percent reduction that has
been standard before now.
That means the typical person retiring at age 62 in 2000 will receive
$721 a month, rather than the old formula's $728.
Living, working longer: Those
born in 1938 who decide to retire only when they're eligible for
regular Social Security benefits, the wait will be two months longer
than before, until two months after their 65th birthday.
"Americans are living longer and healthier lives, which is very
good news, but the system needed to create greater incentives to work
longer in order to continue to function," said Social Security
Commissioner Kenneth S. Apfel. Apfel
said new annual Social Security statements mailed starting this fall
to working Americans about two months before their birthdays are meant
to help people understand the coming changes. The letters tell
people their eligibility ages for normal Social Security benefits and
their benefit levels if they choose earlier or later retirement.
Starting with people born in 1938, the normal Social Security
eligibility age will rise by two months for each year, until it
reaches 66 for those born in 1943.
It then stays at 66 for everyone born through the end of
1954.
Scaling benefits: If
people whose normal eligibility age is 66 choose early retirement at
age 62, their benefits will be 25 percent lower.
After that, the two-month-a-year climb in the retirement age
starts again, until it is finally capped at 67 for those born in 1960
or later. People whose normal retirement age is 67 will see a
30-percent benefit reduction if they choose to retire at age 62.
On the bright side, the early rate of increase in
benefits for those who wait past their normal eligibility age to start
collecting Social Security will gradually rise, up to 8 percent for
those born in 1943 or later. It is 6 percent for someone turning65
in 2000. This incentive is not offered beyond age 70, however.
The retirement-age increase was agreed in 1983 by Republican
President Reagan and Congress, then controlled by Democrats in the
House and Republicans in the Senate, as one of several changes to postpone
looming Social Security cash shortages.
Lawmakers reasoned that with life expectancies rising,
Americans could manage to work a little longer.
They preserved the age-62 early-retirement option for people
who can't keep working cause of health problems and because it is
extremely popular. About 60 percent of workers choose to start
collecting Social Security benefits at age 62.
The explanation for reduced benefits, for those who take early
retirement is that the size of monthly social Security checks
corresponds to a total lifetime amount allotted based on average life
expectancy and time of retirement - much like a private annuity.
The eligibility age for Medicare, the nation's health insurance
program for the elderly, is not affected by the Social Security
changes and will remain at 65.
The York Dispatch, Tuesday, November 30, 1999
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