Goodbye Retirement at 67! New Social Security Age Will Shock Millions of Americans

Goodbye Retirement at 67! 2025 is going to be an important year for people born in 1959 in America. The reason for this is that from next year their Full-Retirement Age (FRA) will increase to 66 years and 10 months. This change is only two months longer than those born in 1958, but for those planning for retirement, the impact will last a lifetime. This small difference is a result of the timetable introduced under the 1983 Social Security Amendments, which provided for a gradual increase in the retirement age from 65 to 67.

What has changed and why?

The Social Security reforms of 1983 provided for a two-month increase in the retirement age, so that the full-retirement age could gradually increase from 65 to 67.

• FRA for people born in 1958: 66 years 8 months
• FRA for people born in 1959: 66 years 10 months
• FRA for people born in 1960 and after: 67 years (This rule will be applicable from 2027)

This change may sound minor, but its impact is huge for those planning for retirement. If you start taking social security benefits even a month early, your monthly pension will decrease for life. At the same time, every month of delay after FRA increases your pension by about 0.67% (about 8% annually) and if you wait till 70 years, it can increase by up to 32%.

Effects of claiming early and late

Social Security benefits are calculated based on when you claim retirement.

• Claim at age 62: For those born in 1959, monthly benefits will be reduced by about 29%.
• Claim at FRA: 100% benefit at 66 years 10 months.
• Waiting until age 70: About 32% more pension.

Even claiming just two months early reduces your pension by about 1.07%. So it’s important to take this small change seriously.

What if you don’t want to work your entire life?

Many people want to avoid working full-time until age 67, but at the same time don’t want their pension to be cut. Here are some smart strategies:

1. Phased Retirement
   • Agree with your employer to work 3 or 4 days a week.
   • 15 hours of work is often enough to cover health insurance and essential expenses.
   • This will help you protect your savings.
2. Build a cash runway
   • Keep an amount equivalent to 18–24 months of expenses in a high-yield savings account or money-market account.
   • This will prevent you from having to sell your investments during market fluctuations.
3. Use your free space
   • Renting out a room in your house can earn you $700–$1,000 per month.
   • Renting out a parking space in urban areas can earn you $150–$300 per month.
4. Part-time jobs with benefits
   • Some large retailers (e.g. Costco, Home Depot, Trader Joe’s) offer medical coverage even if you work 20–28 hours/week.

Tax-smart withdrawal strategies

It’s important to use your investments and savings wisely before retirement.

• Withdraw money from a taxable brokerage account first, so your IRA and 401(k) investments can continue to grow.
• If you need extra cash, deposits (not earnings) in a Roth IRA can be withdrawn anytime without taxes or penalties.
• Keep your Modified Adjusted Gross Income (MAGI) low enough to receive Affordable Care Act (ACA) subsidies until age 65.

Easy ways to earn extra income

• Online tutoring: Earn $30–$50 per hour on Zoom.
• Pet sitting: Great side income on weekends.
• Selling handmade crafts: Time freedom and extra income.

Possibility of further changes in the future

The process of bringing the FRA from 65 to 67 is almost complete. In 2025, the new FRA will be applicable for people born in 1959. Although this change is not very big, it makes it clear that flexibility in retirement planning is necessary.

Proposals to increase the FRA to 68 or 69 years in the future are also being discussed in Congress. Even though no law has been passed yet, if you develop habits like cash reserve, part-time income and low fixed expenses from now on, then there will be no need to fear the coming changes.