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Social Security's so-called "full retirement age" — the age when people can start collecting all of their earned benefits — is about to hit a new threshold, a change that will affect Americans born in 1960 or later.
The full retirement age (FRA) for Social Security is calculated using a worker's birth year, while their monthly benefits are based on the number of years they've worked and their income over that period. People may claim Social Security as early as age 62, but doing so permanently reduces their monthly benefit by about 30% compared with waiting until hitting their FRA.
Starting in 2026, Social Security's full retirement age is set to make its final scheduled increase, marking the last step-up in age enacted under a designed to shore up the program's finances. Before that overhaul, people could claim their FRA benefits at 65, but the law gradually pushed that age higher, culminating in the change that takes effect in 2026.
Since 2021, the FRA has been rising by two months each year. It now stands at for people born in 1959. Next year brings the final step in that schedule, when the FRA will reach 67 for everyone born in 1960 or later.
With the FRA hitting 67, people born in 1960 won't qualify for their full benefits until 2027, rather than 2026. (You can check your own full-benefit age by entering your birthdate into this .)
The increase in the FRA will first impact the youngest baby boomers, or those born between 1960-1964, followed by Generation X, which spans 1965 to 1980. The change comes as many workers report feeling financially unprepared for retirement, with only about four in 10 Americans saying they're on track to maintain their current lifestyle in retirement, to recent research from Vanguard.
"Raising the retirement age is an effective cut in lifetime benefits for younger baby boomers, members of Gen X and all the generations after," said Max Richtman, CEO of the advocacy group National Committee to Preserve Social Security and Medicare, in an email to Autos News.
While the increase in the full retirement age shouldn't come as a surprise given it was enacted 43 years ago, it doesn't guarantee older workers will be any more prepared financially for retirement, he added.
"Having time to plan, however, does not mean they have been able to put aside more for retirement, considering the stagnation of real wages and the rising cost of college tuition, home prices and other key living expenses," Richtman said.
There's also a longstanding gap between the age at which people expect to stop working and their real-world experiences, which can add to the financial strain of funding retirement. Many Americans believe they'll retire at age 65, but the median retirement age in the U.S. .
Nearly six in 10 retirees say they stepped back from the workforce earlier than they had planned, to research published last year by the Transamerica Center for Retirement Studies. An October from the same group found that most middle-class retirees — people with annual household incomes between $50,000 and $199,999 — stopped working earlier than they envisioned because of employment issues, such as losing their jobs, or poor health.
That gap between expectations and reality may explain recent research that found 44% of Americans said they plan to reach their full retirement age, which would result in lower monthly benefits.
Some Americans also flle for Social Security before reaching their FRA out of a belief it makes more sense to bank more years of guaranteed retirement income, even if it's at a lower monthly amount.
Transamerica also found that nine in 10 working Americans say they plan to ignore the conventional financial advice of to claim Social Security benefits, which locks in a 24% boost to a retiree's FRA payments.
In the meantime, younger boomers and Gen Xers will have to hold off a little longer to claim their full Social Security benefits.
"These younger cohorts will have to try their best to plan for retirement, knowing that they cannot collect full benefits until 67," Richtman added.
