THE Social Security Administration is rolling out a big change, robbing Americans of their retirement “golden age” and putting millions of seniors at risk of losing up to 30% of their benefits.
As the federal agency implements the retirement age switch-up, a Social Security expert has warned Americans approaching retirement about how the change could hit them hard.
Social Security expert Aaron Cirksena spoke with The U.S. Sun about how the retirement age change will impact seniors[/caption]
Near-retirees are seeing their retirements start even later under the SSA’s move to continue implementing a change initiated over four decades ago.
The full retirement age, which signifies when recipients can start their full Social Security payments without penalty, is now reaching its highest level.
Congress made amendments to the Social Security Act in 1983 to gradually raise the retirement age, and the FRA has now increased from 65 to 67.
Americans born in 1960 or later will start to see the impact of the change this year as they turn 65 – which was previously considered the “golden age” for retirement.
In order to claim their full Social Security benefits, these near-retirees will have to wait until they turn 67, forced to work two more years than previous beneficiaries.
Those born before 1960 are not impacted by the updated FRA, still able to retire and collect their full benefits as long as they have reached the retirement age for the year they were born:
- 1943–1954: age 66
- 1955–1959: age 66 and a certain number of months, increasing by two months each year:
- 1955: 66 and 2 months
- 1956: 66 and 4 months
- 1957: 66 and 6 months
- 1958: 66 and 8 months
- 1959: 66 and 10 months
On the other hand, the millions of Americans born starting in 1960 are being faced with unprecedented financial obstacles, according to Social Security expert Aaron Cirksena.
Cirksena, CEO of retirement planning company MDRN Capital, spoke exclusively with The U.S. Sun about what the Social Security change means for these beneficiaries and for the federal program’s future.
FAIR OR FOUL?
The SSA’s change to the FRA will have immediate negative impacts on millions of Americans, per the financial expert.
“As the full retirement age for Social Security shifts to 67, many Americans are realizing they’ll need to wait longer than expected to claim full benefits, often too late in the game to adjust their plans,” Cirksena told The U.S. Sun.
“While this change was baked into law back in 1983, its real impact is only now hitting millions nearing retirement.”
Over four decades ago, the proposal to raise the retirement age was aimed at adjusting for longer life expectancies.
What is full retirement age?
Full Retirement Age, or FRA, is the age at which you become eligible to receive 100% of your Social Security retirement benefits without penalty, based on your lifetime earnings.
Also referred to as “normal retirement age,” your FRA is determined by the Social Security Administration based on your birth year:
- 1943–1954: age 66
- 1955–1959: age 66 and a certain number of months, increasing by two months each year:
- 1955: 66 and 2 months
- 1956: 66 and 4 months
- 1957: 66 and 6 months
- 1958: 66 and 8 months
- 1959: 66 and 10 months
- 1960 or later: age 67
The idea was that, if people are living longer, they should also be required to work longer to ensure the sustainability of the Social Security system.
However, making Americans wait an extra two years to claim their full retirement fails to take into account that not everyone experiences aging in the same way.
Different demographics face differing health challenges and life expectancies, for example, raising concerns over the fairness of the blanket policy.
Cirksena explained that those in labor-intensive jobs or with health issues could potentially be impacted the worst by the SSA’s move to push back the retirement age to 67.
The expert argued that it “simply isn’t realistic” for these Americans to wait that long to retire, such as those in construction, healthcare, or service work.
They often have shorter life spans, rely heavily on Social Security benefits, and cannot work into their late 60s due to physical demands.
Given no choice but to continue working to receive their full benefits, many of these near-retirees will instead try and claim disability benefits, Social Security experts have predicted.
HOW TO SUPPLEMENT YOUR SOCIAL SECURITY
Here’s how to supplement your Social Security:
Given the uncertainty surrounding Social Security’s long-term future, it’s essential for workers to consider ways to supplement their retirement income.
Senior Citizens League executive director, Shannon Benton recommends starting early with savings and investing in retirement accounts like 401(k)s or IRAs.
- 401(k) Plans
- A 401(k) is a retirement account offered through employers, where contributions are tax-deferred.
- Many employers also match employee contributions, typically between 2% and 4% of salary, making it a valuable tool for building retirement savings.
- Maxing out your 401(k) contributions, especially if your employer offers a match, should be a priority.
- IRAs
- An Individual Retirement Account (IRA) offers another avenue for retirement savings.
- Unlike a 401(k), an IRA isn’t tied to your employer, giving you more flexibility in your investment choices.
- Contributions to traditional IRAs are tax-deductible, and the funds grow tax-free until they are withdrawn, at which point they are taxed as income.
FUTURE SHOCK
In addition to taking into account longer life expectancies, the decision to up the FRA was aimed at addressing the Social Security program’s financial solvency issues.
The federal agency is currently facing a funding crisis, with predictions that the Social Security trust fund will run out of money for full payments by the mid 2030s.
“Unless Congress acts, current projections show a benefit cut of around 20% by 2033,” said Cirksena.
“That’s not ‘running out,’ but for many retirees, it could feel like it.”
The Social Security expert explained that delaying the retirement age was the government’s tactic to “reduce lifetime benefit payouts without slashing checks outright.”
Many Americans will now be unable to reach their FRA, forcing them to retire early and accept the benefit reduction penalty that the SSA imposes.
“Those who claim early could see their benefits reduced by as much as 30%,” said Cirksena.
For example, an individual qualifying to receive $1,000 each month in Social Security if they retired at 67 would only see a $700 monthly benefit if they were to retire at 62.
By delaying the FRA, the government reduces lifetime benefit payouts without slashing checks outright. And those who claim early could see their benefits reduced by as much as 30%. For people in labor-intensive jobs or with health issues, waiting that long simply isn’t realistic.”
Aaron Cirksena
On the other hand, Americans who can afford to wait until age 70 to retire would see their benefits raised by up to 24%, receiving $1,240 per month.
However, as Cirksena pointed out, delaying one’s retirement a few extra years is not always feasible, especially for those working in physically or mentally taxing fields or for Americans facing health challenges.
The SSA is eyeing to raise the FRA even higher than 67 – a change that could hit 257 million Americans by 2033 under a new plan.
Meanwhile, the federal agency has set out to make another “massive” change that could affect 400,000 daily.
