Surely you have arrived at your workplace and someone has exclaimed “cheer up, there is one day left for your retirement”, right? Well, we have bad news… Starting in 2025, the age to obtain full retirement (FRA) is going to change in the United States.
According to the new regulations of the Social Security Administration (SSA), only those born before 1960 will be able to retire with 100% of their benefits without reductions. For those born in 1960 or later, the retirement age will rise to 67 years, which will directly impact the retirement plans of millions of Americans. Stay and we will tell you everything you need to know about this change.
When will you be able to retire in 2025?
As we said, if you were born before 1959, 2025 is your retirement year, you will be able to retire at 66.8 years old, congratulations because your long-awaited freedom is just around the corner. But… Not everything is so rosy for those born after this year. Those born after 1960 will have to wait until they are 67 to receive their full payments, and if they wish to retire earlier, they will not receive their full payments… Still, there is something new and we are going to tell you about it with an example
Imagine John, who was born in February 1959, his full retirement age would be 66.8 years, right? That is exactly when he would receive 100% of his benefits. So far, so good. But if John wished to have retired earlier, at age 62 (for example) his retirement checks would be reduced forever by up to 30% per month.
On the other hand, if John saw that he had the vitality to continue in his job until age 70, his monthly payments would increase by 30%. This development is causing many people to reconsider whether retiring at 66, 8 or 67 is worth it or whether it is more worth waiting a little longer to have more money.
So, when will I be able to retire in 2025?
Is it worth retiring early? Without any reduction, starting at age 67 if you were born after 1960. The good news for those who remain active after retirement is that any extra income you earn will not reduce your benefits.
You can apply for your benefits up to four months early from Social Security, so you can get a head start by visiting the official SSA website (but make sure you meet all the requirements!!)
For people who have lost a spouse, survivor benefits can be applied for as early as age 60, or even as early as age 50 if the person has a disability. And when the clock strikes age 65, comes a major bonus: Medicare, which covers hospitalization (Part A) and doctor visits (Part B). So, at least as far as health is concerned, turning 65 is not too shabby. It is worth planning to enjoy this new stage with peace of mind!
How much will it cost me if I want to retire early?
For the first 36 months before reaching full retirement age, benefits are reduced by about 0.55% for each month taken early.
After that, the reduction will be 0.42% per month. For example, someone born in 1960 who chooses to retire at age 62 will start receiving their benefits five years early, meaning they will see a permanent 30% reduction in their monthly payments. Retiring early comes at a high cost, but for some, the trade-off of having more free time and enjoying life a little more might still be worth it
States with the lowest taxes for retirees
In some US states, retirees can keep more money thanks to tax breaks on their retirement income, they are the following:
- Illinois (no state tax on pension income, 401(k) and Social Security benefits)
- Iowa (Starting at age 55, residents do not pay state tax on withdrawals from 401(k) accounts, IRAs and Social Security)
- Mississippi (Retirement income is exempt from state tax.)
- Pennsylvania (Although employment income is taxed, pensions, 401(k) and Social Security are not)