Are You Prepared to Delay Retirement? Here’s Why You Might Have To

A big change to Social Security might force you to work longer.

While some people intentionally choose to delay retirement, you may be eager to exit the workforce as soon as you’re able to. And after many years of hard work, that makes sense. Many people opt to close out their careers once they reach full retirement age (FRA) for Social Security purposes since that’s when they’re entitled to their full monthly benefits based on their lifetime earnings. That age is 67 for anyone born in 1960 or later. If that’s the boat you’re in, you may be targeting age 67 as the year you’ll close out your career and embark on an exciting new stage of life. But don’t count on retiring at 67 just yet. Social Security is facing some financial challenges that may result in benefit cuts. One proposal that’s been introduced to avoid that is to push back FRA to an age later than 67. And if that happens, you may be looking at an extended career — whether you’re happy about that idea or not.

You may need to keep your plans flexible

Many people are unable to retire until they start collecting Social Security. And if you don’t have a lot of money in an IRA or 401(k) plan for retirement, then you may not want to claim Social Security ahead of FRA. Though you can take your benefits starting at age 62, for each month you claim Social Security before FRA, those monthly benefits get permanently reduced. Meanwhile, Social Security is expecting a revenue shortfall in the coming years as baby boomers exit the workforce in droves and not enough workers come in to replace them. The program can tap its trust funds to keep up with scheduled benefits for a while. But once those trust funds run dry, which is now expected to happen as early as 2034, Social Security cuts may be the only solution. That’s a scenario, however, that lawmakers are eager to avoid. Social Security cuts could drive millions of retirees into poverty, and that introduces a whole other problem. So lawmakers have been working to find a way to prevent a broad reduction in benefits, and one idea is to move FRA back a year or two so that future Social Security recipients can’t get their full monthly benefits until age 68 or 69. The logic here is that since life expectancies are increasing, postponing FRA reads like a good way to pump more money into Social Security without burdening workers with higher taxes. But if this proposal goes through, a lot of people may be forced to delay retirement until they’re eligible for their monthly benefits in full.

Keep an eye out for Social Security changes

As of now, FRA has not budged for workers born in 1960 or later — it’s still 67. But that has the potential to change over the next few years. So your best is to be on the lookout for Social Security news  — and be prepared to make adjustments to your personal retirement plans as necessary.