The traditional retirement age in the United States could change very soon. Social Security is considering raising the full retirement age, which will affect millions of people. This not only changes when you'll be able to stop working, but also how much money you'll receive during your retirement.
Why do they want to raise the retirement age?
Currently, the age to receive a full pension is between 66 and 67 years old, depending on your year of birth. However, this figure was set decades ago, when life expectancy was lower. Today, people live longer and spend more years retired.
This creates a major problem for the Social Security system, which is funded by contributions from active workers. The number of workers per retiree is decreasing, which causes a financial imbalance.
In addition, the fund that supports the benefits could run out by 2034 if changes aren't made. That's why there's a proposal to raise the full retirement age to 68, 69, or even 70 years old. The idea is for people to keep working longer and for the system to remain viable.
How will this affect workers?
If the age to receive 100% of the benefits goes up, retiring earlier will mean bigger cuts to the monthly pension. For example, someone who retires at 62 years old when the new full age is 70 could receive up to 35% less.
This will especially impact younger workers, who will have to rethink their retirement plans. For them, retiring at 67 could be a thing of the past, and they'll have to save more or look for other sources of income.
For workers who are close to retirement, the rules probably won't change much. Those born after 1960 could face a new reality with more years in the workforce and less money from Social Security.
What can workers do to prepare?
The change in retirement age isn't a surprise, and those who stay alert will be able to adapt better. Some recommendations are:
- Save more on your own: Increasing contributions to private plans like 401(k)s or IRA accounts can be key to having a good financial cushion.
- Delay claiming your pension: The longer you wait to claim it, the higher your monthly payment will be.
- Diversify sources of income: Investing in real estate, stocks, or generating passive income can help.
- Take care of your health: In order to work until 60, 65, or beyond, keeping good physical and mental health is essential.
Planning ahead can make the difference between a peaceful retirement or one full of uncertainty.