Goodbye to Retirement at 67: This New Social Security Rule Sparks Panic Across the U.S.

Abigail Perez
Lifestyle
Navigating the Changing Retirement Scene in the U.S.
Navigating the Changing Retirement Scene in the U.S.

Retirement as we know it is shifting in the United States, and changes to the Full Retirement Age (FRA) are affecting millions. For the longest time, many folks pegged 65 as the go-to age for hanging up their work boots. But with recent tweaks to Social Security benefits, things are changing slowly. As these adjustments roll out, it’s important for anyone nearing retirement to know what’s coming down the line.

Understanding the Shifts in Full Retirement Age

The move to change the FRA started with the 1983 Social Security Amendments. Back then, a gradual bump from 65 to 67 was set in motion. The increase happens in two-month steps, and the exact timing depends on your birth year. For example, if you were born in 1959, your FRA will be 66 years and 10 months starting in 2025. Meanwhile, anyone born in 1960 or later will hit full retirement at 67.

This means that folks born in different years will see varying timelines for their full benefits. Take someone born in 1958, who might have expected to retire at 66 years and 8 months—a couple of extra months waiting just to get there.

Early Retirement and Its Side Effects

Choosing to retire early isn’t without its bumps. If you decide to start claiming Social Security at 62, your monthly benefits will take a hit. For those born in 1959, expect roughly a 29% cut, while the reduction nudges up to about 30% for those born in 1960 or later. On the flip side, holding off on claims beyond your FRA can bump your benefits up by as much as 8% a year, maxing out at a 32% increase if you wait until age 70.

Ways to Bridge the Gap

With these changes in play, there are a few tactics to help you tide over until you hit full benefits:

  • Phased Retirement: Consider switching to part-time work, maybe a three- or four-day week, to help keep the finances steady.
  • Cash Runway: Build up a buffer by saving 18-24 months’ worth of living expenses in a high-yield savings or money-market account.
  • Monetize Extra Space: Renting out extra room in your home—or even your driveway—can bring in some extra income.
  • Bridge Jobs With Benefits: Look into part-time gigs at places like Costco, Home Depot, or Trader Joe’s, where you can work around 20-28 hours a week and still get benefits.

Tax-Savvy Moves for Early Retirees

If you’re thinking about early retirement, having a few tax strategies up your sleeve can really help:

  • Withdraw from Taxable Accounts: This move lets you avoid penalties and gives your other retirement accounts time to grow.
  • Roth IRA Withdrawals: You can take out your contributions tax-free and without a penalty at any age.
  • Keep Modified Adjusted Gross Income Low: A lower figure might help you snag Affordable Care Act subsidies.
  • Side Income Opportunities: Consider gigs like online tutoring, pet sitting, or even selling crafts to bring in extra cash without stirring up big tax issues.

Looking Ahead: What’s on the Horizon?

Lawmakers are still talking about the possibility of nudging the FRA up to 68 or even 69. While nothing’s set in stone yet, it pays to keep an eye on any changes as you plan for retirement. Having a flexible strategy and a good savings cushion—plus a backup plan for part-time work—can help keep you steady as these shifts unfold.

Retirement planning might feel like a moving target right now, but building up cash reserves and exploring part-time job options are smart plays for weathering these changes. With ongoing talks about further increases, staying flexible will help you navigate the coming years with confidence.