Hitting retirement age in 2026? This Social Security change could impact you.
As Social Security’s full retirement age is set to hit a new threshold, Americans born in 1960 or later will be affected by this change. The full retirement age (FRA) for Social Security is determined by a worker’s birth year, with monthly benefits based on their years worked and income. While individuals can claim Social Security as early as age 62, doing so reduces their monthly benefit by about 30% compared to waiting until their FRA.
Starting in 2026, the full retirement age for Social Security will undergo its final scheduled increase, marking the last step in a 1983 congressional reform aimed at strengthening the program’s finances. Prior to this reform, individuals could claim FRA benefits at 65, but the law gradually raised the age, culminating in the upcoming change in 2026.
Since 2021, the FRA has been increasing by two months each year and currently stands at 66 years and 10 months for those born in 1959. Next year, in 2022, the FRA will reach 67 for individuals born in 1960 or later.
With the FRA reaching 67, those born in 1960 will not qualify for their full benefits until 2027 instead of 2026. The increase in the FRA will impact the youngest baby boomers first, followed by Generation X. This change comes at a time when many workers feel financially unprepared for retirement, with only about four in 10 Americans confident in their retirement readiness.
Max Richtman, CEO of the National Committee to Preserve Social Security and Medicare, stated that raising the retirement age is an effective cut in lifetime benefits for younger generations. While the increase in the FRA was enacted over four decades ago, it does not guarantee improved financial preparedness for retirement among older workers.
Retirement Expectations versus Reality
There is often a disconnect between the age at which people expect to retire and the age at which they actually do. Despite many Americans believing they will retire at 65, the median retirement age in the U.S. is 62. A significant portion of retirees end up leaving the workforce earlier than planned due to various factors such as job loss or health issues.
Research has shown that a considerable number of Americans plan to claim Social Security before reaching their FRA, resulting in lower monthly benefits. Additionally, many individuals choose to file for Social Security early to secure more years of guaranteed retirement income, even at a reduced monthly amount.
While financial advisors typically recommend waiting until age 70 to claim Social Security benefits for a 24% boost in FRA payments, nine out of ten working Americans plan to disregard this advice. As a result, younger baby boomers and Gen Xers will need to delay claiming their full Social Security benefits until age 67.
“These younger cohorts will need to carefully plan for retirement, knowing that they will not receive full benefits until 67,” Richtman emphasized.
