For many Americans, retirement is something they look forward to for decades. But in 2025, a significant change could impact how and when people are able to retire. If you’re someone who was planning to retire at 66, you’ll need to adjust your plans. For those born in 1960 or later, the full retirement age (FRA) is now 67, meaning you’ll have to work a little longer to get the full Social Security benefits you’ve been counting on.
Here’s a closer look at what that change means, how it could affect your Social Security benefits, and what you can do to adjust your retirement plans.
Why the Change Is Happening
You might be asking yourself, “Why is the retirement age changing?” It’s all about how much longer people are living. When Social Security was first introduced, the average life expectancy was much shorter, so the system was designed for people to collect benefits for a shorter period after retirement.
Today, though, life expectancy is longer, and many people are working well into their 60s and even 70s. The government has made the decision to raise the retirement age to ensure that the Social Security system remains sustainable for future generations.
What the Change Means for You
So, if you’re planning on retiring at 66, you might need to rethink your timeline. Here’s how this could affect your benefits:
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Claiming Early (at 62): If you’re ready to retire at 62, you can still start collecting Social Security. However, your monthly benefit will be reduced by about 30% compared to what you’d get if you wait until 67. This means that if you rely heavily on Social Security as your primary source of income, you’ll need to carefully budget and plan for a smaller check.
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Claiming at Full Retirement Age (67): If you wait until you’re 67 to claim your benefits, you’ll receive the full amount that Social Security promises you, based on your earnings history. This could be your best option if you want to avoid penalties for early withdrawal.
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Delaying Your Claim: If you’re able to keep working beyond 67, consider waiting to claim Social Security until you’re 70. For every year you delay, your monthly benefits will increase by 8%, which can make a big difference over time.
Impact on Your Retirement Plans
With the full retirement age rising to 67, there are a few things you’ll need to consider when planning for your future:
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Can You Work Longer? If you’re in good health and enjoy your work, you might want to consider delaying retirement and waiting for those higher benefits. This could make a significant difference to your monthly payments, which will help you have a more comfortable retirement.
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Boosting Your Savings: If you can’t delay your retirement or if you’d rather not, now is the time to focus on increasing your retirement savings. Contribute more to your 401(k) or IRA to make up for any lost Social Security income. The earlier you start, the more you’ll have when you retire.
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Diversifying Your Income Sources: Social Security shouldn’t be the only source of income during retirement. Look into other options like a pension, rental income, or personal savings. Having multiple income streams will give you more security and flexibility as you approach retirement.
What This Means for Younger Generations
If you’re in your 20s or 30s, the change to the full retirement age might not seem like something you need to worry about just yet. But it’s actually a good wake-up call to start thinking about your future. As life expectancy continues to increase, the reality is that we’ll all likely have to work longer than previous generations.
Now is the time to start planning and saving for your retirement. The sooner you begin, the better prepared you’ll be when it’s your turn to retire.
How to Prepare for the Change
If you’re nearing retirement and the full retirement age change has thrown a wrench in your plans, don’t panic. Here are a few tips on how to adjust:
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Evaluate Your Financial Situation: Take a good look at your finances and retirement savings. How much can you realistically save between now and the time you retire? Make a plan to increase your savings and build a cushion for the years you’ll have to wait.
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Consider Working Part-Time: If you’re not ready to fully retire, but don’t want to work full-time, consider looking into part-time work or freelancing. This can help ease the transition into retirement while allowing you to continue receiving income.
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Talk to a Financial Advisor: If all of this feels overwhelming, a financial advisor can help. They can assist you in adjusting your retirement strategy, so you can take full advantage of the new Social Security rules.
The Bottom Line
The increase in the full retirement age means many people will need to work a little longer to get their full Social Security benefits. But that doesn’t mean you can’t still retire comfortably. By adjusting your savings plan, considering the option to delay your claim, and diversifying your sources of income, you can set yourself up for a financially secure retirement.
It’s also a reminder that early planning is key, especially if you’re younger. With life expectancy on the rise, starting your retirement savings early will put you in a strong position to weather the changes in the future.
