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Re-activateWhen the dust and/or mud settles after the presidential election, one question likely to be on the national agenda is whether to "reform" Social Security and Medicare and, if so, how.
Privatizing Social Security may be a dead duck, but other possibilities remain. One idea, raising the age for benefits, was the subject of this recent National Bureau of Economic Research (NBER) paper.
The NBER paper factors "age inflation" into the calculation, recognizing that people generally live longer now than when the rules were made. To illustrate, the authors say that if eligibility ages had been adjusted since these programs began, here's what they would have looked like as of 2004 (the ranges reflect different methods of calculating the adjustment):
• Social Security early retirement age (currently 62) would have been 65.6 to 67.
• Social Security normal retirement age (currently 66 to 67): 73 to 81.8.
• Social Security delayed retirement age (currently maxes out at 72): 76 to 78.6.
• Medicare eligibility (currently 65): 70 to 72.
• Penalty-free IRA withdrawals (currently 59.5): 63.8 to 66.
What would a change like this mean to you? If you're already retired or expect to retire in the near future, probably nothing. It's unlikely that politicians would be so brazen as to change the rules of the game that quickly.
However, if your retirement is decades off, be forewarned. Pay particular attention to any moves to raise the Medicare age, unless you're sure of having other health coverage past age 65.
Comments anyone?—Greg Daugherty
Greg writes the "Retirement Guy" column each month in the Consumer Reports Money Adviser newsletter.
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