The gradual rise in the age at which Americans can claim full Social Security benefits is reshaping retirement plans across the country. Starting in 2025, those born in 1959 will have to wait until 66 years and 10 months to access their full benefits—a change that will continue to affect future generations.
For many Americans, the magic number for retirement has long been 65. But as the age for full Social Security benefits rises, retirement plans are facing a pivotal shift. For people born in 1960 or later, full retirement age (FRA) will now be set at 67, rather than 65. This gradual increase, which started with the 1983 Social Security Amendments, reflects broader demographic trends and fiscal realities.
The Full Retirement Age: What Has Changed?
The idea behind the rising retirement age is rooted in an increasingly longer life expectancy, alongside the financial sustainability of the Social Security system. According to the Social Security Administration, for those born in 1959, the full retirement age will be set at 66 years and 10 months, beginning in 2025. While this may seem like a modest change, it signals a continued trend towards a higher FRA for future generations.
People born in 1960 and later will have to wait until they turn 67 to access their full benefits, an increase from the previous 66 years and 8 months set for the 1958 cohort. The effects on people who wish to retire earlier are notable—taking benefits at 62, the earliest available age, results in a 30% reduction in monthly payments for those born in 1960 or beyond. This decrease underscores the importance of timing and strategic planning when it comes to Social Security claims.
Planning for the Long Haul: Strategies for Early Retirees
Despite the gradual increase in the FRA, many Americans still aim to retire before they hit 67. In these cases, it is crucial to adopt strategies that can bridge the gap between early retirement and full Social Security benefits.
One key recommendation from financial experts is to build a “cash runway.” Having 18-24 months of living expenses saved in a high-yield savings or money-market account can provide a cushion for early retirees. Moreover, part-time work is another viable option. Jobs offering benefits, such as those available at Costco or Trader Joe’s, can provide healthcare coverage while offering some income.
Another option is the phased retirement model, where individuals reduce their working hours, easing the transition into full retirement. Renting out extra space in one’s home, such as a room or parking spot, can also supplement income and reduce the strain on savings.
