The retirement age is a crucial factor for Social Security and Medicare because it determines when individuals become eligible to receive benefits from these programs.
Social Security is a federal program that provides retirement, disability, and survivor benefits to eligible workers and their families. Initially, at the outset of these programs, the full retirement age was set at 65. However, a 1983 overhaul of this program began raising the age for full retirement. The retirement age for Social Security benefits is currently 66 for those born between 1943 and 1954, and it gradually increases to 67 for those born in 1960 or later. If a person starts collecting Social Security benefits before their full retirement age, their benefits are reduced. Conversely, if they delay their benefits past their full retirement age, they receive a higher monthly benefit. Those whose retirement age is 67 will only receive 70% of their benefit if they retire at 62. If full retirement age is increased, it could mean a further reduction in early retirement benefits.
When Congress made changes to Social Security in 1983 it envisioned that newly implemented 401K plans would provide retirement assistance and decreased dependency on the program. Economists point out that that scenario has not occurred. Employer provided pension plans used to provide retirement income. Those gave way to 401K plans which put the responsibility of saving on the worker. Labor economists show that many retired workers have little or no savings plan at all. Thus, many Americans are wholly dependent on Social Security for retirement income.