RSC proposes Social Security retirement age increase

At a time of an increasingly aging population and longer life expectancy, the Republican Study Committee (RSC) proposed raising the retirement age for workers who are still a long way from retirement.

This is part of a budget initiative for fiscal year 2025, which is called "Fiscal Sanity to Save America."

According to an official White House communication, this proposal calls for more than $1.5 trillion in cuts to Social Security, including an increase in the retirement age to 69 and a cut in disability benefits.

Currently, workers in the United States must wait until they reach the age of 67 to receive full Social Security benefits.

It is worth noting that President Joe Biden has already stated on Capitol Hill that "If anyone here tries to cut Social Security or Medicare or raise the retirement age, I will stop them," he said.

According to statistics provided by the Secretary of the Department of Labor and Human Resources (DTRH), Gabriel Maldonado, currently 463,000 is the estimated number of people who are out of the labor market due to retirement, of all age ranges. Of this figure, 14,000 are under 55 years old, 77,000 are between 55 and 64 years old, and 372,000 are over 65 years old.

Meanwhile, of the people out of the labor force for reasons not related to retirement, 258,000 are in the 55 to 64 age bracket, while 696,000 are 65 years of age or older.

Accordingly, Social Security Public Relations Director Víctor Rodríguez reported that there are 830,415 beneficiaries of the federal program on the island.

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Currently, $951.7 million in benefits are paid each month and the average amount per beneficiary is $1,145.

Closer and closer to insolvency

It is worth noting that by 2033, the Social Security Trust Fund is projected to be depleted, and if nothing is done, the result will be an overall benefit cut (for all beneficiaries) of about 23%.

"This was something that has been looked at for some time, because Social Security as it stands today, the likelihood of running out of funds is high. So extending the working life of this person is one of the measures to address this situation," said economist Leslie Adames, of the firm Estudios Técnicos.

In his opinion, this could be a short-term solution, but he said that in the long term it would become a serious structural problem.

On the other hand, he said that these discussions point to the need for a change in people's behavior, especially recognizing that they will not be able to depend solely on Social Security to cover their retirement.

Other savings alternatives

"The situation raised also points to the importance of those who are still in the labor market to begin to evaluate their financial position and be proactive in their growth and planning to look for ways to accumulate resources for their retirement. This should encourage saving... Of course, in today's inflationary context, saving is complicated for many, but the adjustment in consumption in the present, to save for the future is very important. The Social Security system is not enough," added Adames.

The same opinion was expressed by José Acarón, state director of AARP in Puerto Rico, who informed that the organization has been warning congressmen for years that they should look for ways to mitigate the effects that insolvency could bring.

"We have to push that people have to prepare for retirement, with other savings accounts, 401k, pensions and others. They have to prepare themselves to have other resources so that their quality of life is not impacted in retirement," Acarón said.

Majority is dependent on funds

The AARP director explained that ideally, Social Security should be 35% of retirement income, however, the majority of that population on the Island depends 100% on this income.

According to the most recent publication of the demographic profile of the elderly, during the year 2020, the main sources of income for people 60 years of age or older were Social Security (80.8%), followed by the Nutritional Assistance Program (PAN) (42.0%) and Retirement Pensions (30.5%).

"There is no 'silver bullet' here, that is, it is not a single action that will solve it, it must be a set of measures to work on long-term solvency so that the next generations can count on this Social Security," added Acarón.

Meanwhile, Isabel Soto Albors, past president of the Society for Human Resources Management (SHRM-PR), confirmed that nowadays more people are retiring later from their jobs and acknowledged the need to look for alternatives to solve Social Security.

"I think, from the standpoint of cutting benefits, nobody likes it. Raising the retirement age does not please either, but I think it is a less unpleasant initiative for the general public," she said.

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She also emphasized that, as human resources professionals, one of the topics they have dealt with most is financial education, but she reported that currently there are many people who avoid looking for savings alternatives and continue "leaving it for the last minute," which is why it is urgent to continue insisting.

On the other hand, Minerva Gómez, a gerontologist and president-elect of the Association of Owners of Long-Term Care Centers, said that if it materializes, it could become an economic burden for the Puerto Rico government and for the families of the elderly who enter these homes.

"If you increase the age to 69 or 70, then those adults who are now reaching us between 60 and 70 years of age, who will not have Social Security, will depend more on their families and on the government to help them with a significant contribution to pay for the home," Gómez said.

These centers are subsidized by the Department of the Family, but it covers from $1,300 to $1,500 per person per month, and they do not adjust to cost increases that currently exceed $1,900.

She admitted that most of the residents in these centers are over 70 years of age, however, there are always younger people who currently depend 100% on their Social Security, as reported by Acarón.

Impact of delayed retirement

All the spokespersons agreed that the main challenge right now, which involves more seniors staying in the workforce, is to train these workers in new technologies and tools.

"That is very important in a context where the labor market is changing so fast, the skill sets that companies are requiring from employees are a bit more specialized and technological. The challenge is how to ensure that this person can continue in the labor market," said Adames.

With this agrees the past president of SHRM. "Companies are still having a lot of trouble making an impact on the workforce with people, say 50 years old or older because of different factors. Sometimes they do not apply, and they do not dare to apply, because among the requirements they ask for technological knowledge that they do not know and that is where the need for reskilling comes in".

In this regard, the Secretary of Labor explained that he will soon launch a second elaborate version of the "Puerto Rico está Fajao" campaign, tied to a platform called Perfiles.

"It is a recruitment portal to facilitate labor integration, in which through this platform we are also going to be able to address these older adults, to support them in their training studies on what is 'skilling' and 'reskilling', to help them to place them," he explained, saying that the announcement will be made in the coming months.