Think tank proposes capping Social Security benefits at $100,000
A Washington think tank has proposed capping annual Social Security benefits for married couples at $100,000 as a way to reduce a looming deficit in retirement trust funds.
When should Americans retire?
We can claim Social Security at age 62 and Medicare at age 65. But Social Security’s “full” retirement age is 67, and benefits don’t cap out until age 70.
The average American actually retires at age 62, according to two reputable annual surveys conducted by the Employee Benefits Institute and the Transamerica Retirement Research Center.
But researchers at Boston University, based on census data, put the average retirement age at a slightly higher age of 62.6 for women and 64.6 for men.
With numbers like these being thrown around, it may be natural for Americans to be confused about when exactly they should retire.
“There is no retirement age,” says Andrew Biggs, a senior fellow at the American Enterprise Institute. “It’s not that retirement age is out there and we’re not discovering it. It’s just that it’s an unclear concept.”
In the past, the retirement age in America was 65. no longer.
A few years ago, many Americans thought 65 was the expected age for retirement. Until the 1980s, age 65 was called the “normal” retirement age for collecting Social Security benefits. This period was also the age at which most Americans could receive Medicare and the traditional retirement age for many pensions.
And the calculation of retirement benefits became ambiguous. In 1983, with Social Security facing bankruptcy, Congress passed legislation to gradually raise the full retirement age to 67. Pensions faded and a new system of 401(k) retirement savings rewarded Americans for working longer.
The average retirement age has steadily increased over recent decades. Between 1994 and 2024, the typical retirement age for men and women rose by about three years, according to research by Alicia Munnell, senior consultant at Boston University’s Retirement Research Center.
Today, most Americans would have difficulty pinpointing the age at which society expects them to retire.
“From a public policy perspective, we do not expect these retirement milestones to be synchronized anytime soon,” said Transamerica Center CEO Katherine Collinson.
The four milestone retirement ages for 2026 are:
Instead of one retirement age, it gives four retirement ages. Here are four milestone ages that will define the retirement age for Americans in 2026.
62
Age 62 may not be the typical retirement age. Many Americans consider age 62 to be late middle age. But that seems to be the most common retirement age in America.
As mentioned above, two reputable annual surveys consistently find that the average American worker retires at age 62.
“For more than 10 years, the age of 62 has remained the same,” said Craig Copeland, head of the Wealth Benefits Research Department at EBRI, which conducts an annual retiree confidence survey.
Age 62 is also the year when most Social Security claims are made. That’s not surprising. Because that’s the age at which most of us have access to money.
65
The Social Security Administration no longer considers 65 to be the “normal” retirement age. But the age at which most Americans become eligible for Medicare still remains. For millions of working Americans, the combination of Social Security and federal health insurance makes retirement possible.
“As long as Medicare stays at 65, I think that’s going to be a big anchor point,” Copeland said.
While 62 may be the most common age to claim Social Security, this is not the average age. In 2024, the average American claimed Social Security at age 65, according to agency data.
67
Under current Social Security rules, age 67 is considered the “normal” retirement age for Americans born after 1960.
If you apply at age 67, you can receive a “full” benefit. The earlier you claim, the less money you’ll get. At age 62, the minimum benefit amount is reduced by 30%. Your monthly benefit check increases for each year you wait.
70
But the problem is, your Social Security benefits don’t stop increasing once you turn 67. Effectively, filing before age 67 will result in a fine. If you claim more than 67, you get a bonus. Benefits increase by 8% each year until age 70, when the bonus reaches its maximum.
After accounting for penalties and bonuses, the difference between receiving Social Security benefits at age 62 and age 70 increases by about 76 percent, said Lawrence Kotlikoff, an economist at Boston University.
Penalty or Bonus: Call it what you like. You can receive the most money from Social Security if you wait until age 70.
In a sense, “70 has become the new 65,” Munnell wrote in a paper titled “70 is the Effective Social Security Retirement Age.”
Sliding benefit sizes are designed to ensure that people who enroll in Social Security at different ages receive roughly the same benefit over their lifetime.
But in reality, retirement experts regularly advise Americans to claim Social Security once they turn 70. Based on simple human lifespans, the typical retiree will receive the maximum benefit in the long run by claiming the largest monthly check possible.
Will the retirement age continue to rise?
In the United States, the average retirement age fell steadily for several decades until about 1990, when the average retirement age began to rise again.
Retirement ages have increased as Americans live longer, stay healthier, and have less physically demanding jobs. The rise of 401(k) plans and changes in Social Security policy have made longer careers more rewarding. Employers stopped providing health insurance to workers who retired before age 65.
Today, Manel said, those trends are “to some extent a reality.” She expects retirement ages to remain stable for the next few years.
But what happens when further changes come to Social Security?
Federal programs are projected to be underfunded by 2032. Once reserves are depleted, recipients could see their benefits reduced by 28%.
Policy experts have suggested several possible modifications. One proposal is to raise the “full” retirement age beyond 67.
“They could raise it another year to 68,” Copeland said. “I think it will be on the agenda to get Social Security back on solid footing.”
If Social Security calculations change again, Americans may have to consider yet another “normal” retirement age.
