Understanding Full Retirement Age (FRA)

The FRA is the age at which individuals can claim their full Social Security benefits, which depend on their work history and earnings. The policy was revamped in 1983 to align with increasing life expectancies, resulting in a gradual increase in the FRA based on birth year.

For example, those born in 1957 will reach an FRA of 66 years and 6 months, enabling full benefits starting in 2023. In contrast, individuals born in 1958 must wait until they're 66 years and 8 months old to receive their full benefits, which will begin in September 2024.

The 2025 Shift and Its Impact

The full retirement age will jump again for individuals born in 1959—increasing to 66 years and 10 months—making November 2025 their pathway to full benefits. This trend will culminate in a final increase for those born in or after 1960, who will not be eligible for their full retirement benefits until age 67. Specifically, if you were born in January 1960, you won't see the full benefits arrive until January 2027.

A Stark Reality Check for Future Retirees

Unfortunately, many in the younger baby boomer and Gen X cohorts find themselves inadequately prepared for retirement. A recent study from the ALI Retirement Income Institute revealed alarming statistics: About one-third of younger baby boomers may rely on Social Security for at least 90% of their retirement income by age 70. However, these benefits are only designed to replace about 40% of a person’s pre-retirement income.

In the case of Generation X—those born between 1965 and 1980—savings are even more concerning. With an average retirement portfolio sitting at around $150,000, the gap between their current savings and the estimated $1.5 million needed for a comfortable retirement is staggering. Nearly 40% of Gen Xers have no retirement savings at all!

Maximizing Your Benefits

On a positive note, older individuals still have options to enhance their Social Security benefits. By delaying their claims until they reach 70 years old, they can see their benefits increase by approximately 25% compared to their FRA amounts. Surprisingly, only about 4% of Americans wait that long to reap the maximum rewards, according to the Transamerica Center for Retirement Studies.

As we move closer to 2025, it's essential for everyone, especially those born in the late '50s and '60s, to focus on their retirement planning. Are you ready for the changes ahead? Make sure to strategize your claim age carefully and consider bolstering your savings to avoid the pitfalls of an insecure retirement. Don't let these vital changes catch you off guard!