As retirement in the US continues to change, one of the most important changes is that the average age of retirement is moving up or down. People will have to change how they plan for their financial future and their Social Security benefits for a long time because of this change.
If you are thinking about or about to retire, you need to know how these changes may affect your Social Security payments in order to make smart choices.
The Shift in the US Retirement Age
The average age of retirement in the US has slowly gone up over the past few years. Many Americans used to retire in their early to mid-60s, but now people work longer than they used to because they want to be financially secure, people are living longer, and healthcare costs are going up. The average age to retire in the United States is now between 65 and 66, but many people choose to work into their late 60s or even early 70s.
Several things, such as changes in employment trends, access to health care, and the amount of money needed for retirement, could cause this shift. But what does this mean for Social Security benefits now that the retirement age has changed? Let us look around.
Social Security and Retirement Age: The Basics
People can start getting Social Security benefits when they reach a certain age. How much you get, though, can change depending on when you decide to start getting cash:
Early Retirement (Age 62): You can begin receiving Social Security benefits at age 62, but your monthly payout will be reduced compared to your full benefit amount. The reduction can be as much as 30%, depending on the year you were born.
Full Retirement Age (FRA): This is the age at which you are eligible to receive your full Social Security benefits. For people born in 1960 or later, the FRA is 67. If you claim Social Security at this age, you will receive your full benefit amount.
Delayed Retirement (Age 70): If you choose to delay claiming your Social Security benefits past your FRA (up until age 70), you will earn delayed retirement credits. This can increase your monthly benefit by 8% for each year you delay, offering a larger payout in the long run.
How the Changing Retirement Age Affects Social Security
As more Americans work past the normal retirement age of 65 and put off retirement, there are a number of possible effects on their Social Security benefits.
Increased Social Security Payments for Delayed Retirement
Because the retirement age is going up, more people are choosing to delay getting their Social Security benefits. They can get more money each month through the delayed retirement credits we talked about earlier if they work longer and do not start collecting benefits until age 62 or even 67.
This can make their long-term financial situation a lot better, especially since Social Security benefits are often a big part of retirement income.
Longer Work Periods Can Impact Lifetime Earnings
Because of this change, many people may have longer careers, which could mean they make more money over their lifetime. Social Security benefits are based on your 35 highest-earning years, so if you work longer, you might be able to replace years when you did not make as much with years when you did. Your monthly Social Security payment is based on the average of these earnings, so this could mean that you get more money.
Reduced Need for Early Social Security Benefits
More people may be able to afford to wait to claim Social Security until they reach full retirement age or later now that the average retirement age has gone up. People who are better off financially because they have saved more or are still making money from work may not need to start collecting Social Security benefits at age 62. This means they can wait for a bigger benefit in the future.
Potential Impact on Social Security Trust Fund
People working longer might not have a direct effect on their benefits, but it might have long-term effects on the Social Security system as a whole. The Social Security Trust Fund could be made stronger by getting more people to work and pay into Social Security for longer periods of time.
On the other hand, if the number of older people continues to rise faster than the number of workers who pay into Social Security, it could put more strain on the system’s ability to last.
Social Security Benefits and Health Considerations
People whose health or abilities make it impossible for them to work longer might also be worried about the rising retirement age. Some people may choose to work into their 70s, but others may have to stop because of health issues.
In these situations, it might be necessary to start getting Social Security earlier, even if it means getting less money. It’s crucial to balance health considerations with financial needs when deciding when to start claiming benefits.
What Can You Do to Prepare?
Because retirement trends and Social Security are always changing, it is important to make plans ahead of time. You can make sure that your Social Security benefits work best for you by doing the following:
Review Your Social Security Statement: Regularly check your Social Security statement online to keep track of your earnings record and projected benefits. This will give you an idea of what to expect when you reach retirement age.
Consider Delaying Your Benefits: If possible, consider waiting until your full retirement age or even age 70 to claim benefits. Delaying can result in a higher monthly payout, which may be worth it if you’re able to continue working or have other financial resources.
Maximize Your Earnings: Aim to increase your lifetime earnings, as Social Security benefits are based on your highest-earning 35 years. This could mean working longer or seeking higher-paying job opportunities.
Work with a Financial Planner: If you’re unsure how the changing retirement age or your Social Security benefits will impact your financial situation, consider working with a financial planner. They can help you strategize how to maximize your benefits and create a plan for your retirement.
The US retirement age is evolving, and the decision to claim Social Security benefits is no longer as simple as it once was. By working longer and delaying Social Security, many Americans can increase their benefits, but this also requires careful planning.
Understanding how the shift in the average retirement age impacts your Social Security payouts can help you make smarter decisions about when to retire, when to claim benefits, and how to ensure a financially secure future.
