New Retirement Age 2025: A big change is Social Security coming to American-style retirement; starting in stages in 2025, the Social Security Administration is going to make changes that could affect millions of people: Full benefits will no longer be equivalent to retirement at age 67. With life expectancy rising and pressure on the Social Security trust fund increasing, it’s time for the U.S. government to change eligibility timelines and benefit structures to accommodate everyone’s retirement needs.
For decades, age 67 has been synonymous with full retirement age (FRA) for Social Security benefits. Times are changing, however. Starting with people born in 1960 or later, the rule now formally sets the full retirement age at 68. This is happening amid serious concerns about ensuring the longevity of Social Security, which, without disruption, could face a funding shortfall sometime in the mid-2030s.
As a result, people who want to retire at age 67 will have their monthly benefits permanently reduced unless they wait a full year. Early retirement—and here’s the irony—still exists at age 62, but with a 35 percent reduction in monthly payments, up from a 30 percent drop previously.
Why this change matters to you
The entire retirement plan, including monthly payments, is affected by the new rules. For someone potentially retiring early, this could mean losing thousands over time. Speaking of benefits, delaying retirement after the new full retirement age can increase benefits by 8% per year until age 70.
These adjustments may also cause working-age people to stay in the workforce longer. While this may be seen as a good opportunity to save, others, especially those in demanding jobs, may feel pressured or insecure.
What should you do now?
If you were born in 1960 or later, this is a good time to reconsider your retirement planning. Start by using the SSA’s online benefit estimator to determine a forecast of your new FRA with early and delayed retirement scenarios. Consider what this means in terms of your savings, lifestyle, and health insurance planning. Finally, meet with a financial advisor to discuss how your 401(k) or IRA plans can make up for some of the lost income. After all, Social Security was never intended to fully cover a person’s retirement.