Table of Contents
washington D.C. – As of January 2025, a meaningful milestone in Social Security history arrives: the full retirement age officially rises to 67 for anyone born in 1960 or later. This change, phased in over decades, impacts millions of Americans planning for their future and necessitates a re-evaluation of retirement strategies. While the increase may seem distant for some, proactive planning is crucial to ensure financial security in later life.
Understanding the Shift & Its history
The current increase to age 67 isn’t a sudden change. It was initially enacted with the 1983 Social Security Amendments, championed by a bipartisan commission led by Alan Greenspan, then Chairman of the Council of Economic Advisers under President Ronald Reagan. The goal was to address long-term solvency concerns within the Social Security system, primarily driven by increasing life expectancies and a changing demographic landscape – fewer workers supporting more retirees.Prior to these amendments, the full retirement age was 65, established in 1935 with the original Social Security Act. The gradual increase began in 2000, rising by two months each year until reaching 67. For those born in 1954 or earlier, the full retirement age remains 66. Individuals born in 1955 have a full retirement age of 66 and 2 months, increasing incrementally until 67 for those born in 1960 or later.
What This Means for your Benefits
While 67 is the full retirement age, claiming benefits earlier – as early as age 62 – remains an option. However, doing so results in a permanent reduction in monthly payments. For those claiming at 62, benefits are reduced by approximately 30% compared to what they would receive at full retirement age.
Conversely, delaying benefits past full retirement age results in an increase. For every year benefits are delayed until age 70, the monthly payment increases by 8% – a significant incentive for those able to postpone claiming. As of November 2023, the average monthly Social Security benefit for retired workers was $1,848, according to the Social Security Governance. This figure will vary substantially based on individual earnings history.
Preparing for a Longer Working Life & Retirement
The rising retirement age underscores the importance of robust retirement planning. Here’s how to prepare:
Build a Substantial Cash Reserve: Financial advisors generally recommend having 18-24 months of living expenses saved in a readily accessible account. This provides a buffer against unexpected costs and allows for versatility in claiming Social Security.
Explore Part-Time Income Options: Supplementing retirement income with part-time work is increasingly common. Opportunities include online tutoring (earning $30-$50 per hour), pet sitting, or leveraging hobbies by selling handmade crafts. Platforms like Upwork and Fiverr offer a wide range of freelance opportunities.
Optimize Tax Strategies: understanding the tax implications of Social Security benefits is crucial. Up to 85% of Social Security benefits might potentially be taxable, depending on your overall income. Consulting with a tax professional can definitely help minimize your tax burden.
Consider a Roth IRA Conversion: Converting traditional IRA funds to a Roth IRA can be beneficial, especially if you anticipate being in a higher tax bracket in retirement.
Review Your Investment Portfolio: Ensure your investment strategy aligns with your retirement timeline and risk tolerance. A diversified portfolio is essential for long-term growth and stability.
The increase in the full retirement age is a reminder that retirement planning is an ongoing process. flexibility and proactive preparation are key to navigating these changes and securing a cozy future.
Source: https://eladelantado.com/news/new-retirement-age-67/
FAQs
What is the new full retirement age for Social Security?
Starting in 2025, the full retirement age for Social Security benefits will be 66 years and 10 months for people born in 1959, and 67 for those born in 1960 or later.
Can I still claim Social Security benefits at 62?
Yes, you can still claim Social Security benefits at 62, but you will receive only approximately 70% of your full benefit amount. The longer you wait, the higher the monthly benefit will be.
Why is the retirement age being increased to 67?
The full retirement age is being increased to 67 to address the longer life expectancy of Americans and to maintain the financial sustainability of the Social Security system.
*How can
