It has always been important to have a retirement plan. It is probably one of the most important decisions a person makes during their working life. And it is that, beyond dreaming of the day when we do not have to work anymore, it is about securing the years we have left when we no longer have economic support that does not depend on the State.
But, the rules of the game have changed over time, and now, more than ever, it is vital to understand how changes in the retirement age can affect our plans. If you are one of those who were born in the 50s or 60s, the changes in Social Security will directly impact you. But do not worry: we will help you make the best decisions for your future.
How will the retirement age change in 2025?
2025 is coming on strong and will make a change in the retirement age effective. Since the 1980s, a law has been implemented that has made the retirement age gradually increase. So, these modifications are going to completely change the labor panorama. We explain, it was in 1983 when Congress approved a reform to increase the retirement age from 65 to 67, however, as they did not want to make this change too abrupt, they decided that it would be gradual. This change was made, mainly because life expectancy has increased in recent decades, and the pension program needs to be redone so that it can be sustainable. So, this 2025, the main change is that those born in 1959 will reach retirement age according to these new rules.
What does “full retirement age” mean?
The full retirement age is the time when you can claim 100% of your Social Security benefits after you’ve spent the required number of years contributing to the government. If you retire earlier, you’ll receive less each month; if you decide to wait, your benefits will increase. For those born before 1960, the full retirement age will increase to 66.8 months, while for those born in 1960 or later, it’s 67 years.
Can I retire early?
Yes, you have options. You can retire as early as age 62 (that’s the minimum age allowed) but your benefits will be permanently reduced (and you can lose up to 30% per month…). On the other hand, if you want, you can wait until age 70 and your monthly payments will be higher (8%). It’s a personal decision that depends on your health, your savings, your goals for the future and your desire to continue working.
How do I plan for retirement then?
Keep in mind that life gets worse over time, so to plan for your retirement, please set aside a portion for medical expenses! Talk to a financial advisor who can help you structure a personalized plan according to your needs.
What is better?
There is no best plan, neither waiting nor bringing it forward. You have to be aware of your own capabilities and monthly expenses to make this decision. Maybe it is not worth waiting for a little more money, or maybe it is not worth continuing to work for a little less. It is such a personal decision that we cannot help you there.
And what about young people?
We young people have been sent a very clear message: start saving when you can. And with the retirement age rising, who doesn’t tell us that there won’t be a pension pot left when it’s time for us to retire? So, start saving as soon as possible so you don’t have to depend exclusively on Social Security in those years of retirement.