The Social Security Administration (SSA) is raising the full retirement age (FRA) to 66 years and 10 months in 2025. This change will impact millions of Americans nearing retirement. The increase in the FRA was part of the Social Security Amendments of 1983.
When Social Security was introduced in the 1930s, the average life expectancy was around 61 years. Today, it’s over 76 years. The government is adjusting the FRA to reduce strain on the Social Security Trust Fund as Americans live longer.
You can still retire as early as 62, but doing so comes with a permanent reduction in your monthly benefit. For example, if your full benefit at FRA is $2,000 per month, retiring at 62 could reduce it to around $1,400 per month. This is a 30% reduction that is permanent.
On the other hand, delaying retirement beyond your FRA increases your monthly payout. For every year you delay, you get an 8% increase, up to age 70. Delaying retirement to 70 could increase your monthly benefit to $2,480 per month.
Low-income workers are more likely to rely heavily on Social Security. They may not be able to delay retirement due to physical job demands or lack of savings. This could result in lower lifetime benefits.
Middle-income workers often have 401(k)s and IRAs. While they have more flexibility, they may still face impacts from medical needs or job availability. Careful planning is essential to avoid benefit reductions.
Social Security retirement age update
High-income workers are more likely to have additional savings. They can often afford to delay retirement.
They can significantly benefit from the increase in monthly payouts by delaying claims until age 70. To navigate the US retirement age hike in 2025:
1. Find out your exact FRA using the SSA’s Retirement Age Chart.
2. Use the official Social Security Estimator to understand your benefits at different claiming ages. 3.
Consider your health and longevity. If you’re in excellent health and have a family history of longevity, delaying benefits might be worth the wait. 4.
Factor in employment plans. If you plan to work past age 62, your benefits could be temporarily reduced if you earn over $23,400 per year before FRA. 5.
Speak with a financial advisor. Professional advice can help you optimize your claiming strategy based on your income, assets, and retirement goals. By staying informed and planning carefully, Americans can navigate these changes.
They can turn potential setbacks into opportunities for a secure retirement.
Image Credits: Photo by Aron Visuals on Unsplash
