The age at which individuals can claim full Social Security benefits has been a central aspect of retirement planning for decades. However, recent changes are set to affect millions, particularly those nearing retirement in the coming years. In 2025, the full retirement age (FRA) is scheduled to rise, which will have implications for many individuals’ financial strategies.
These adjustments, affecting a broad range of future retirees, could influence how benefits are claimed and planned for. According to a recent article by Marca, understanding these shifts in the Social Security system is essential for informed decision-making when it comes to retirement age and benefits.
What is the New Full Retirement Age?
Since the 1983 Social Security Amendments, the full retirement age has been gradually increasing. Previously set at 65, the FRA was raised incrementally to 66 and 67 over several decades. For people born in 1959, the FRA will be 66 years and 10 months. However, for those born in 1960 or later, the FRA will be fixed at 67.
This change means that individuals in this group will need to wait longer to receive their full Social Security benefits, which will likely have a profound impact on how they plan for retirement.
The change in the FRA might seem minimal, but it can significantly alter the amount of Social Security benefits a person will receive over their lifetime. By delaying retirement, individuals will earn higher monthly benefits, but they will also need to plan for working longer or finding alternative sources of income until they can claim the full amount.
Early Retirement and Benefit Reductions
Many individuals choose to retire early, often starting at age 62. While this may seem like an attractive option, there are important financial consequences to consider. For those born in 1959, claiming Social Security benefits at age 62 will result in a 29% reduction of their monthly benefits. For individuals born in 1960 or later, this reduction will be even greater, amounting to 30%.
The decision to take early retirement can be difficult. While some may be eager to leave the workforce sooner, others may need to continue working for financial reasons. Understanding the impact of early retirement on Social Security benefits is essential. Retirees who take benefits early will receive smaller monthly checks, which can add up to a significant difference in their overall retirement income.
How to Plan for Retirement in Light of These Changes
To ensure financial stability during retirement, careful planning is necessary, especially with the rise in the FRA. If you’re considering early retirement, there are several strategies that can help you prepare. One option is to withdraw from taxable accounts, such as investment savings, to bridge the gap between early retirement and the age at which you can claim full Social Security benefits.
Additionally, keeping your modified adjusted gross income low can help reduce your tax burden and allow you to qualify for potential tax benefits or avoid penalties. Finally, taking on a side hustle or part-time job can provide extra income, giving you more flexibility and the ability to delay claiming Social Security while growing your savings.
Additional Support and Compassionate Allowances
In addition to the changes in the full retirement age, the Social Security Administration (SSA) is also taking steps to ensure that individuals facing challenging health conditions receive the support they need. Recently, 13 new conditions were added to the Compassionate Allowances list. These conditions allow individuals with devastating diagnoses to receive Social Security benefits more quickly.
By adding these 13 conditions to the Compassionate Allowances list, we are helping more people with devastating diagnoses to quickly receive the support they need – said SSA
Commissioner Frank J. Bisignano, according to the agency’s August press release. This move reflects the SSA’s ongoing commitment to assisting those in need of expedited benefits as they approach the Social Security retirement age.
