Retirement Age Increases to 67 in 2023
In the United States, the full retirement age (FRA) is the age at which a person can receive their full Social Security retirement benefits. For many years, the FRA was set at age 65, but the age has gradually increased in recent years. As of 2022, the FRA for those born in 1960 or later is 67. Keep reading to explore the reasons for this shift and how it may impact Americans planning for retirement.
Why is the FRA moving to 67
The decision to increase the FRA was driven by several factors. First, Americans live longer and healthier lives, so they spend more time in retirement. This creates a strain on Social Security funds, which rely on payroll taxes from current workers to pay benefits to retirees.
The baby boomer generation, the largest generation in U.S. history, is now reaching retirement age. As a result, more people are retiring and collecting benefits, further straining the Social Security system.
Furthermore, the FRA was set at age 65 in 1935 when Social Security was created. At that time, the average life expectancy was much lower than today. As life expectancy has increased, so has the time people spend in retirement.
Impact on retirement planning
The increase in the FRA has several implications for those planning for retirement. First and foremost, workers will need to save more money to support themselves during the extra years before they can get full Social Security benefits.
In addition, the increase in the FRA means that people will need to work longer to receive their full benefits. This can be a significant burden for those unable to work due to health or other factors.
Moreover, the increase in the FRA may discourage some people from retiring early. In the past, many people chose to retire at age 62, the earliest age at which they could begin collecting Social Security benefits. However, with the FRA now at 67, retiring at 62 means a reduced benefit. This may lead some workers to stay in the workforce longer than they would have otherwise.
The increase in the FRA may also lead some workers to consider alternative retirement income streams, such as personal savings, investments, or other retirement plans. This can be a good thing, as it can provide more financial security and flexibility in retirement.
Social security’s sustainability
While the increase in the FRA may be a burden for some workers, it’s important to note that it’s part of a larger effort to ensure the sustainability of the Social Security system. As mentioned, Social Security is funded by payroll taxes from current workers. However, with an aging population and longer life expectancies, fewer workers are contributing to the system for longer periods. This creates a strain on Social Security funds.
By increasing the FRA and other measures, such as increasing payroll taxes or reducing benefits for higher earners, Social Security aims to ensure that the system remains sustainable and benefits future generations of retirees.
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