The average retirement age is steadily increasing, and it’s not just a personal decision anymore. Congress has also raised the “normal” retirement age for the Social Security program. This shift in retirement age has significant implications for government contractors planning to retire and collect Social Security benefits in the near future. Here’s what you need to know about the rising retirement age and its impact on your retirement plans.
Understanding the Impact on Social Security Benefits
While the normal retirement age set by Congress doesn’t dictate when you can retire from work, it does determine when you can start receiving full Social Security benefits. The current normal retirement age is 67, and collecting benefits before this age results in a reduced amount. Any increase in the retirement age can affect the benefits you’ll receive when you retire. It’s crucial to be aware of these trends and plan accordingly for your retirement.
Anticipating Future Changes
As life expectancies continue to rise, it’s likely that the retirement age will increase further to maintain the financial stability of the Social Security program. However, raising the retirement age poses challenges. Not all workers can easily extend their careers, especially those in physically demanding jobs. This discrepancy raises questions about the feasibility of increased retirement ages for certain individuals.
Moreover, Social Security is projected to deplete its funds between 2034 and 2038, highlighting the uncertain future of the program. Restructuring efforts will likely be made in the coming years to address these financial concerns.
Planning for Delayed Social Security Benefits
Given the uncertainty surrounding Social Security, it’s essential to plan and save for delayed benefits, particularly if retirement is a decade or more away. If you retire before reaching the full retirement age, your retirement savings will become your primary source of income. Developing a solid financial plan that considers this possibility is crucial for your long-term financial stability.
Tax Planning for Retirement
With the future of Social Security in question, maximizing your retirement income becomes even more important. Many individuals underestimate the complexity of retirement income taxation, including the taxation of Social Security benefits. Understanding your tax situation during retirement is just as crucial as managing your income during your working years.
We can help you comprehend how your retirement income is taxed, allowing you to make informed decisions about handling your income streams. Drawing from the right accounts at the right times and strategically timing Social Security benefits can significantly impact your tax liability. Our team of tax planners can assist you in developing a tax-efficient retirement plan, ensuring that you retain more of your income and have peace of mind about your financial security in the years to come.