Lawmakers Could Raise Social Security's Full Retirement Age. Here's What That Might Mean for You

Yahoo

01-07-2025

Lawmakers are considering changes to Social Security to prevent benefit cuts.
One option is to raise full retirement age.
Not only might that force you to work longer, but it could also affect the amount of money you get each month.
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It's not exactly a secret that Social Security is facing some financial challenges. The program's main revenue source, payroll taxes, is expected to diminish as baby boomers retire in large numbers.
Social Security will need to tap its trust funds to keep up with scheduled benefits in light of that. But as per the most recent Social Security Trustees Report, the program's combined trust funds will be depleted by 2034, at which point significant benefit cuts could be on the table.
Lawmakers don't want to see those cuts happen, so they've been talking through different solutions to prevent them. And one such solution is to raise Social Security's full retirement age.
Currently, that age is 67 for anyone born in 1960 or later. Some lawmakers feel that pushing that age to 69 could help prevent broad Social Security cuts.
But a change like that could have a significant impact on your retirement. Here's what it could mean for you.
Unless you have a decent amount of savings, you may not be able to retire without claiming Social Security at the same time for income. But if you're someone who can't retire without Social Security, and you don't want to slash your benefits for life, changing full retirement age could create a situation where you have to work two years longer than you want to.
But there's more to it than that. You may feel compelled to work an extra two years, but whether you'll actually be able to may be a different story.
Not only do older workers sometimes get pushed out of the labor force because of age discrimination, but if your job is physical in nature, you may not be able to do it an extra two years. Worse yet, if you're forced to retire a couple of years early because your body can't handle the physical work, you may be looking at a larger reduction in your monthly Social Security benefits if full retirement age is moved up.
For example, right now, claiming Social Security at 65 instead of 67 will reduce your monthly benefits by about 13.33%. If full retirement age is moved to 69 and you sign up for benefits at 65, you could be looking at twice the reduction.
People who delay Social Security past full retirement age can accrue delayed retirement credits. Those are worth 8% per year your claim is delayed, and you can rack them up until you turn 70.
It's unclear to whether lawmakers will extend the timeframe for accruing delayed retirement credits in conjunction with pushing back full retirement age. But if they don't, and full retirement age is moved to 69, it means your options for boosting your monthly checks will be more limited.
You don't need to make any immediate adjustments to your retirement plan to account for changes to Social Security's full retirement age. While the above proposal is on the table, it's one of several being floated to prevent benefit cuts.
That said, it's not a bad idea to get more aggressive in funding your nest egg. If this change does become official, and you don't like the idea of working until 69 instead of 67, ramping up on savings could make it possible to retire sooner.
In fact, even if no changes are made to Social Security and benefits aren't cut, it's still important to bring savings with you into retirement. In a best-case scenario (meaning no benefit cuts), Social Security will only replace about 40% of your income if you earn an average wage.
Most seniors need a lot more money than that to cover their costs without stress. So it's never a bad idea to boost your savings.
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Lawmakers Could Raise Social Security's Full Retirement Age. Here's What That Might Mean for You was originally published by The Motley Fool