Social Security Full Retirement Age Could Increase From 67. Here’s Who Gets Hurt the Most

There’s a key number workers are advised to keep in mind when planning out their retirement — Social Security’s full retirement age, or FRA.

For anyone born in 1960 or later, FRA is currently 67. And it’s been that way for a while.

But Social Security is facing a major funding shortfall. In the coming years, it expects to owe more in benefits than it collects in revenue. And if lawmakers don’t act, Social Security might have to cut benefits as early as 2032.

Raising Social Security’s FRA is an option lawmakers can look at to prevent benefit cuts. But there’s one group of people who are likely to lose out big time if that happens.

Why pushing back FRA could help     

A lot of people wait until FRA to file for Social Security because claiming earlier results in reduced monthly benefits for life. Many retirees don’t have savings (or at least not a lot) and need Social Security to cover their costs. And so many push themselves to wait until FRA to file because they can’t afford to have their benefits reduced.

Forcing workers to wait longer to claim their benefits does a few good things for Social Security. First, it lowers near-term expenses for the program. Secondly, it can reduce the total lifetime benefits paid to retirees.

But just as importantly, pushing FRA back a year or two encourages workers to stay in the labor force longer. That, in turn, increases payroll tax revenue, which Social Security desperately needs to stay afloat.

Who gets hurt by a later FRA

If lawmakers vote to increase Social Security’s FRA, the people who get hurt by that decision are most likely going to be younger workers. The reason is that a change of this nature would probably need to be phased in. It wouldn’t be reasonable to announce that FRA is changing for older workers who may be on the cusp of ending their careers.

What would probably happen is a gradual phase-in, similar to the phase-in for workers born after 1954. For those born between 1943 and 1955, FRA is 66. Then, FRA increases gradually.

For people born in 1955, FRA is 66 and two months. For those born in 1956, it’s 66 and four months. FRA then increases by two months per year of birth until 1960.

A similar approach could be taken this time around if lawmakers opt to go this route. But if that change is announced in the coming years, workers in their late 50s and 60s may not see their FRA change, or change much. Workers who are much younger may be the ones who bear the brunt of that decision.

Furthermore, such a change could be particularly detrimental to workers in physically demanding jobs. For them, working a couple more years may not be realistic.

But that also puts these workers in a tough spot. If their new FRA is 69 but they can only physically work until 67, they’re basically forced to claim benefits early and reduce them in the process.

A tough problem to solve

Lawmakers need to figure out a way to prevent Social Security cuts. If benefits are slashed, countless seniors could quickly fall into poverty.

But raising FRA opens the door to a lot of problems. Workers who can’t delay retirement risk financial ruin if their benefits are slashed. And younger workers in general risk getting sentenced to longer careers than they want.

Where does that leave workers today? Until Congress makes this change official, there’s no need to panic. But it’s important to be aware that a later FRA is on the table. Saving well for retirement is a good way to be adaptable to unfavorable changes, whether it’s a raised FRA or smaller benefits due to a broad reduction that just wasn’t preventable.