Many people have long expected to receive full Social Security benefits at age 65. However, changes in U.S. law mean that the full retirement age (FRA) is shifting for those born in 1960 and later cohorts. Starting in 2026, the FRA will be 68 instead of 65. This means Americans must wait longer to receive their full benefits.
This change affects how and when people can claim Social Security. To make smart decisions, it is important to understand the rules about early claiming, penalties, and the benefits of delaying your claim. This article will explain how the new FRA works and share strategies to maximize your Social Security benefits.
What is Full Retirement Age (FRA)?
Full Retirement Age is the age when a person can begin to receive 100% of their Social Security benefits. In the past, many believed this age was 65. But overtime, the government has gradually increased it. For those born between 1943 and 1954, FRA is 66. If you were born after 1960, your FRA is now set at 68.
This means that if you claim benefits before reaching 68 (for people born in 1960 or later), you may receive less than the full amount. On the other hand, waiting to claim beyond FRA can increase your monthly payments. The FRA helps balance when you start to get benefits and how much you will receive.
Why Is the Full Retirement Age Increasing?
The increase in FRA is mainly because people are living longer. The Social Security system needs to stay financially stable to support future retirees. Raising the FRA helps manage the costs by encouraging people to wait longer before claiming benefits.
This change can seem difficult for younger people planning their retirements. But it is meant to ensure Social Security remains available for decades. Understanding the new rules gives you time to plan your retirement strategy wisely.
Early-Claim Penalty: What Happens If You Claim Before FRA?
If you decide to claim Social Security benefits before reaching your FRA, your monthly payments will be permanently reduced. This is called the early-claim penalty. It means you will get less money every month than if you waited until your FRA.
For example, if your FRA is 68 but you begin claiming at 62 (the earliest age you can claim), your benefits could be reduced by as much as 30%. This reduction stays for life, so even after you reach 68, your payments won’t increase to the full amount.
Choosing to claim early may seem tempting, but it’s important to think about the long-term effect on your income.
Delayed-Credits Boost: Benefits of Waiting Past FRA
On the other hand, if you wait to claim Social Security benefits after your FRA, you earn delayed retirement credits. These credits increase your monthly benefit amount by a certain percentage.
For those born in 1960 or later, waiting until age 70 (the maximum age for delayed credits) can boost your monthly benefits by up to 8% per year past your FRA. This means your benefit at age 70 can be as much as 24% higher than if you claimed right at 68.
This strategy can provide more income later in life, especially if you expect to live a long time. It acts as a way to increase your retirement income without additional savings.
Choosing the Right Time to Claim Social Security Benefits
Deciding when to claim depends on your personal situation. If you need money earlier or face health concerns, claiming before FRA might make sense. But if you expect a long retirement, waiting can maximize your income.
Consider factors like your health, financial needs, job situation, and family history when planning your claim. Using tools like Social Security calculators can help you estimate your benefits at different ages.
How the FRA Change Affects Younger Workers
The FRA shift to 68 affects those born in 1960 or after, which includes many young and middle-aged workers today. If you are in this group, understanding the new rule is important for your long-term retirement plans.
Start saving early and include other retirement savings options like 401(k)s or IRAs. Social Security is just one part of your retirement income, and planning ahead will help you maintain financial security.
Final Thoughts on the New FRA and Social Security Planning
The full retirement age increasing to 68 is a significant change that requires thoughtful planning. Understanding early-claim penalties and delayed retirement credits can help you make better decisions about when to start receiving your benefits.
Keep learning about Social Security rules, explore your options, and consider consulting a financial advisor. Smart planning today will help ensure a stable and comfortable retirement tomorrow.
