If you are one of those people who, every time you see your monthly income, runs to the calendar to find out how much time you have left to work… We regret to have sad news for you. The United States Social Security has proposed that the Full Retirement Age (FRA) be increased to 66 and 10 months for people born after 1959, so that it reaches 67 years for people born in 1960 and later. So, here we are going to tell you what has led the Administration to take this measure and what else you need to know about your future retirement.
What does this mean for workers?
This means that the FRA (the moment when workers can retire and get the full benefits of their retirement) will come later, although it is possible to do so from the age of 62 (the so-called early retirement). However, retiring early at 62 will mean losing up to 30% of the monthly amount that corresponds to you.
On the other hand, the idea of continuing to work until age 70 has been proposed so that the amount increases by 8% annually.
Both proposals need to consider what is most convenient for each person; would a person continue being a firefighter until age 70? It is something that needs to be thought about calmly and consider what is best for each individual.
The COLA Adjustment
Another thing that our retirees can take into account is that the COLA will change next year to 2.5%. It is a little lower than in other years, but that means that we are on the way to stabilizing the economy after so many price increases.
The good thing about this COLA is that it seeks to completely stabilize the economy, so that by adding that small percentage, the beneficiaries of Social Security payments will not notice the ravages of inflation.
This new COLA adjustment will come with the first payment of 2025, which we already know will be received on December 31st since December 1st is a holiday and the SSA does not want there to be any delays in payments to any beneficiary.
Why are the FRAs increasing?
As you well know, Social Security payments depend on people who contribute each year and pay taxes. In this way, the entire system is supported by workers who, year after year, declare their taxes to the banks. With all the money collected, payments are established each year for retirees, for people with work disabilities and for those who have economic needs because their economic resources are few.
Now, as life expectancy is increasing, and inflation is the order of the day, the government needs to alleviate the effects of, let’s call it, the economic “expense” that this entails. So, the Administration is going to raise the total retirement age so that there are more people contributing (and fewer collecting their pension).
And why was there so much inflation?
Mainly, because of the Covid-19 crisis, which devastated the American (and world) means of production, causing the United States to reach an inflation rate in 2022 that had not been seen since the 1980s in the country (they reached up to 8.3% COLA!). So, now, as we are in the process of economic deceleration (this means that inflation is gradually receding), the COLA will be, as we have mentioned before, 2.5%.
Summary of key facts:
- The new full retirement age of 66 years and 10 months will apply to people born in 1959
- The retirement age for those born from 1960 onwards will be 67 years.
- The monthly benefit can be reduced by up to 30% for those who retire at age 62
- Delaying retirement until age 70 can increase the monthly amount by 8% annually.
- This year’s COLA will be 2.5%