The year is 2024, and the "baby boom" generation is reaching a milestone: "peak 65." Over the next few years, an astounding 11,200 individuals will turn 65 every day, marking a substantial demographic shift in the U.S. However, many in this cohort may be taken aback to learn that their golden years won't be quite as golden as they expected, at least financially. The reason? 65 is no longer the automatic age for full Social Security retirement benefits.
Changes enacted in 1983 have deliberately pushed the full retirement age (FRA) up from 65 to 67 over a 40-year period. This means most people retiring today will have their full benefits kick in between 66 and 67. This can come as a surprise, especially for those who haven't been closely monitoring their Social Security statements or who confuse FRA with the Medicare eligibility age of 65.
The good news? Delaying claiming Social Security benefits can significantly raise your monthly checks. Holding off until age 70 enables you to receive the maximum 100% of your earned benefits. Even small delays can be advantageous; each month you wait past your FRA boosts your monthly check by about two-thirds of 1%. This can translate to a significant difference over your lifetime.
But there's a catch. Claiming Social Security before your FRA, even at 65 for Medicare purposes, means permanently reduced benefits. This is because you're necessarily using up a smaller slice of your retirement pie earlier. While some individuals with poor health prognoses may find claiming early beneficial, it's critical to understand the long-term financial implications.
The future of Social Security remains uncertain. While possible changes to shore up its funding could include further increases in the FRA, experts anticipate these would likely only affect those currently 55 and younger. However, it's a reminder that depending solely on Social Security is not smart, and boomers need to be proactive in their retirement planning.
Here are some key takeaways for boomers approaching retirement:
- Know your full retirement age: Don't assume it's 65. Check your Social Security statement online to determine your specific FRA.
- Consider delaying benefits: While early access may be tempting, maximizing your monthly checks often requires waiting until your FRA or even later.
- Explore other income options: Don't rely solely on Social Security. Consider retirement savings, pensions, and other income sources.
- Seek professional advice: A financial planner can help you create a personalized retirement strategy based on your individual needs and goals.
Reaching 65 is an important milestone, but it's not the end of the financial planning journey. By understanding the nuances of Social Security and taking proactive measures, boomers can navigate the evolving landscape and ensure a comfortable and fulfilling retirement. Remember, 65 might not be the golden ticket, but with smart planning, it can be the beginning of a golden retirement.
However, such a change would likely impact only prospective retirees ages 55 and younger, Joe Elsasser, President of Covisum, a Social Security claiming software company stated, and isn't essentially a sure thing, as life expectancy in the U.S. is no longer accelerating.
