There are millions of Americans who rely on Social Security as a primary source of income, and there are 3 major changes that will affect beneficiaries.
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The Full Retirement Age Is Changing
The age at which Social Security recipients can claim their full benefits, known as the Full Retirement Age (FRA), has changed. As it stands, all those who were born in 1960 or later will now have to wait until age 67 to claim their full Social Security benefit.
Indeed, you can start collecting from the age of 62, however, your benefits will be permanently reduced. Should you start collecting benefits at age 62 instead of age 67, your benefit payment could be reduced by approximately 30% for the rest of your life.
If you wait until FRA you will receive 100% of your benefits and if you wait further, up until age 70, you will receive approximately 8% more for each year you wait.
From this, it can be noted that the longer you wait to claim your benefits, the more you end up receiving. Now, not everyone will be able to wait until age 70, but for those who can, it will be extremely beneficial.
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Social Security Recipients Are Getting a Raise
Every year, the Social Security Administration (SSA) announces the cost-of-living adjustment (COLA). This is meant to help retirees keep up with the rising costs of daily expenses. The COLA for 2026 is yet to be announced but regardless of whether the raise is small or large, every little bit counts especially for those living on fixed incomes. This will help fund their essential expenses.
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The Rules for Working While Collecting Benefits Are Changing
The government has also made changes to the rules for people who want to continue working while collecting Social Security but have not yet reached FRA. Although you can work and earn money while receiving benefits, there is a limit on how much you can earn before a portion of your pay cheque is temporarily withheld. This is known as the earnings limit.
However, the good news is that once you reach FRA, you can work as much as you want and keep your full Social Security benefit. There are no limits at all. Additionally, any funds that were withheld prior to that time will be eventually refunded to you, so they are not permanently lost.
What This Means for Retirees
It’s important to remember that these three updates will affect everyone who is already receiving Social Security benefits or anyone who plans to.
If you are already receiving Social Security benefits, you will see a slight increase next year as a result of the COLA. It’s crucial to thoroughly consider your retirement plans and determine when it would be most practical for you to begin receiving Social Security payments.
The best solution is to review and understand your personal situation and see which the best time is to retire. The end goal is a peaceful retirement and doing what’s best for you and your living situation is important. Beneficiaries must make sure they understand these rules so that they are able to make wise financial decisions.
The Bottom Line
Social Security serves as the financial backbone for millions of Americans and even small changes in rules may impact your retirement in terms of finances.
It’s important to keep updated with verified information and be sure to consult with a financial advisor if you require assistance in making decisions. Plan ahead and ensure that you make smart decisions to maximize your finances during retirement.