While citizens do not often ponder what their retirement age could mean for them, Social Security is forcing citizens to consider retirement and perhaps even pushing citizens to choose to retire later. As per a change made official, the full retirement age is now 67. Gone are the days of wanting to retire at 65, and gone are the days of claiming full Social Security benefits at 65. Citizens born in 1960 or later are most affected by the change and will have to collect benefits at 65 years old or older if they do not want to settle for reduced benefits for life.
Understanding the Changes due to saying goodbye to the 65 retirement age
Although many Americans still link the full retirement age to 65, Social Security’s full retirement age has been moving away from the 65-year mark due to reforms that were initiated since 1983. For citizens born in 1959, FRA stands at 66 years and 10 months. However, a further shift is coming in 2026 that will cause citizens born in 1960 or later to wait for 67 to claim their full retirement benefits.
While the change in full retirement age (FRA) does not at all mean that citizens cannot retire any time before 67, it does mean that retirees who retire early may incur an added financial burden as their benefits will be reduced to 30%. The increase in retirement age reflects the fact that Americans are living longer, too, and depending on Social Security benefits for longer than before.
Goodbye to the Special Earnings Rule
While we bid farewell to the previously accepted FRA, we also say goodbye to the Special Earnings Rule. As per this rule, specific individuals who were not of full retirement age as yet were able to receive their full monthly Social Security benefits for the months that they earned below the threshold, regardless of whether their total annual income increase exceeded the limit or not.
Saying goodbye to this rule means moving towards considering a citizen’s annual income only. As such, $1 tends to be deducted for every $2 earned above the annual limit. Workers will have to work longer and plan when they will want to start receiving their benefits, but they will have to be rather tactful in how they manage their earnings, as drastic mistakes could cost them too much.
Ways in which to make your Social Security benefit work for you
Retirement and planning for retirement are of utmost importance. There are a few tried and tested strategies that can be used to ensure that you stay financially afloat even during retirement.
- Opt to delay benefits. From next year, many citizens will have to wait until 67, or rather 70 if they want to ensure that they receive the maximum monthly Social Security benefits. When citizens choose to wait until 70 to claim, they increase their benefits by about 32% which will be highly fruitful in the long run.
- Utilize available SSA tools. To make retirement work out for you, you need to use tools like the SSA Retirement Estimator to understand how your benefit can be affected and to estimate your Social Security strategy.
- Keep track of your earnings. Make sure you are tracking your annual income and working on strategies to save during retirement as well.
As we bid farewell to the full retirement age as we know it, we have to assess the broader picture behind such shifts.
The broader picture of the change in the FRA
It is official, SSA Provisions Affecting Retirement Age have been put in place, and retirees will have to wait longer to see retirement benefits. What these changes mean is that the SSA is trying to ensure the longevity of the fund, whilst putting the ball in the senior citizens’ court by encouraging them to wait longer to retire.
Since citizens are living for longer, it makes sense that the IRS is encouraging them to retire at a later age. Citizens should consider 3 Social Security mistakes to avoid when financial planning becomes crucial next year.
Disclaimer: This content is informational only and does not supersede or replace the SSA’s or IRS’s own publications and notices. Always verify any specific dates and amounts by following the direct links in our article to SSA.gov or IRS.gov, or by consulting your local SSA field office or tax professional.
