Retirement Age Reform: Key Changes and What You Should Know Now

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Social Security’s Full Retirement Age (FRA) is seeing a change, with individuals born in 1959 facing an updated timeline for claiming full benefits. As of January 2025, the FRA for people born in 1959 will increase from 66 years and 8 months to 66 years and 10 months, marking a key shift in the Social Security system.

This change is part of the broader adjustments designed to ensure the sustainability of the program, with the goal of balancing payouts with the increasing life expectancy of Americans. For those affected, understanding the shift and planning accordingly is essential for maximizing retirement benefits.

Understanding Full Retirement Age (FRA)

Your FRA is the age at which you are eligible to claim 100% of your Social Security benefits. The age varies depending on when you were born, ranging from 65 to 67. For those born in 1958, the FRA was set at 66 years and 8 months. However, for individuals born in 1959, this will now increase to 66 years and 10 months, which will apply starting in 2025.

This shift is part of a phased approach to gradually raise the FRA, a measure first introduced through the 1983 amendments to the Social Security Act. The goal is to adapt to the increasing life expectancy of Americans and ensure that the program remains financially viable.

Impact of the New FRA on Your Social Security Strategy

  1. Early Retirement: A Potentially Costly Option You can start claiming Social Security benefits as early as age 62, but doing so means your benefits will be permanently reduced. The reduction is calculated as follows:
    • A reduction of about 0.55% per month for the first 36 months.
    • A reduction of about 0.42% per month for any additional months.
    For instance, if you retire at 62 with a new FRA of 66 years and 10 months, your benefits could be reduced by up to 30%. If your benefit at FRA is $2,000, this could mean a reduction to $1,400, amounting to a loss of over $140,000 over 20 years. If you are considering early retirement, make sure to evaluate other income sources, such as savings or pensions, to help supplement your reduced Social Security benefits. Additionally, plan for healthcare costs before you qualify for Medicare at age 65.
  2. Delaying Retirement: An Opportunity to Increase Your Benefits On the other hand, if you delay claiming your Social Security benefits past your FRA, your monthly benefit will increase by about 0.67% per month, or 8% per year, until you reach age 70. This could be an appealing option for those in good health who expect to live a longer retirement. For example, someone with a FRA benefit of $2,000 could see their monthly payout grow to $2,640 by waiting until age 70, resulting in an extra $7,680 annually. Over ten years, this could add up to nearly $80,000 in additional income.

Key Considerations Based on Your Retirement Plans

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