Retirement is all about strategy, even if you plan to rely on Social Security during your sunset years. Because of the way that the Social Security program is set up, the bulk of the effort that comes with planning for retirement is somewhat automated. This is because you will make monthly contributions to the dedicated Social Security payroll tax throughout your working career, and later once you retire, you will essentially be claiming back those very contributions.
Generally speaking, most people aim to retire by age 65, however, if you plan on relying primarily on Social Security benefits, this may not be the wisest move. When the Social Security program was first started, the full retirement age, which is the age at which you become entitled to 100% of your benefits, was 65. In 1983, however, the program was amended and in pursuit of maintaining the program’s financial health amid growing life expectancy, it was decided that the full retirement age would be gradually increased until it reached 67 years of age
Next year in 2026, this amendment that began decades ago in 1983 will finally be fulfilled and the full retirement age will officially be 67 years of age for those born in 1960 and later. Following this, any changes to the full retirement age will require Congressional approval. Here is everything you need to know.
How does retirement age impact your benefits?
If you have accumulated the minimum forty work credits by paying into the Social Security payroll tax, you will be eligible to claim benefits from the Social Security Administration (SSA) from age 62. Claiming at age 62 is, however, considered at claiming early and as a result, your benefit will be subject to a permanent reduction of up to 30%. This is because the full retirement age (which is the age at which you become eligible for 100% of your benefit) is currently 66-67.
When the program was first introduced, the full retirement age was 65 for all claimants regardless of year of birth. Since the 1983 amendments, however, the full retirement age has been increasing in two month increments annually. The year in which the claimant was born also factors in to the new full retirement ages. Listed below are the amended full retirement ages and the cohorts they apply to based on year of birth:
- Year of birth from 1943 – 1954 — full retirement age of 66
- Year of birth of 1955 — full retirement age of 66 years and two months
- Year of birth of 1956 — full retirement age of 66 years and four months
- Year of birth of 1957 — full retirement age of 66 years and six months
- Year of birth of 1958 — full retirement age of 66 years and eight months
In 2025, the full retirement age increased to 66 years and ten months for those born in 1959. In 2026, this will be increased to 67 years for those born in 1960 and later, and thus the amendment will have finally been fulfilled.
Expectations of retirement may not live up to reality
When planning for the future, most people typically aim to retire by age 65. In actuality, however, the median age for retirement in America is 62. According to research conducted last year by the Transamerica Center for Retirement Studies, “nearly six in 10 retirees say they stepped back from the workforce earlier than they had planned.” Furthermore, a survey conducted with the same group in October also found that, “most middle-class retirees — people with annual household incomes between $50,000 and $199,999 — stopped working earlier than they envisioned because of employment issues, such as losing their jobs, or poor health.”
Claiming Social Security early results in a benefit with a locked in reduction of up to 30%, however, research has found that “44% of Americans said they plan to claim Social Security before they reach their full retirement age.” The reasoning behind the decision to willingly take a cut to their benefits is that they would rather have more years of a guaranteed income during retirement, even if it means a reduced amount.