For decades, the retirement age in the United States had been set at around 65 years old. However, in 1983, Congress passed a reform that began to gradually increase this age to adjust to the population's longer life expectancy. This reform has had a direct impact on citizens, and in 2025, the most significant change in this law will begin to take effect.
Starting in 2025, people born in 1959 will see an increase in the full retirement age (FRA). This figure, crucial for calculating when they can start receiving their full Social Security benefits, rises to 66 years and ten months (66 años y diez meses) for those born that year. This increase will be an important factor in Americans' financial planning.
How does the new retirement age affect people?
The full retirement age (FRA) is the age at which beneficiaries can begin to receive their full Social Security payments. Although most people have gotten used to the idea of retiring at 65, the 1983 law caused the retirement age to gradually increase. For those born in 1958, the FRA will be 66 years and eight months (66 años y ocho meses), while those born after 1960 will have to wait until age 67 (67 años).
Although the FRA is increasing, it is possible to apply for Social Security benefits before reaching that age, starting at 62 (62 años). However, doing so means a significant reduction in monthly benefits, which could reach up to 30%, depending on how early the application is made.
Delaying the application can bring greater benefits
Experts recommend waiting until age 70 (70 años) before applying for benefits to take advantage of an 8% annual increase. This strategy can result in a substantial improvement in monthly payments, which can make a considerable difference in the long term.
The decision of when to apply for retirement should be based on a careful assessment of personal and family needs. Keeping fixed expenses low, according to McCullough, is essential to have flexibility in the future. As each individual's circumstances vary, early planning and making informed decisions become more crucial than ever.
In addition, it is important to consider the impact of life expectancy and health when making this decision. If a person is in good health, delaying the application can result in a greater accumulation of benefits.
Meanwhile, those with health problems or who plan to enjoy retirement earlier may choose to apply for benefits sooner. However, they should keep in mind that they will see a reduction in monthly payments. The key is to adapt the strategy to individual circumstances, evaluating both physical well-being and future financial needs.