The average retirement age is on the rise, and we don’t just mean the age at which people are choosing to stop working; we’re also referring to the “normal” retirement age set by Congress for the Social Security program. In 1935, the normal retirement age was 65. That was gradually increased to 67 after Social Security was amended in 1983. What does this mean for individuals planning to retire and collect Social Security benefits soon? Here’s what you need to know about the rising age for retirement.

How It Impacts Your Social Security Benefits

Why does that normal retirement age set by Congress matter? While it certainly doesn’t dictate when you can actually retire from work, it does impact when you can collect your Social Security benefits, and just how much of that benefit you can collect. The normal retirement age of 67 is the age at which you can receive full Social Security benefits; while you can start collecting on Social Security as early as age 62, you will receive a reduced amount. So, any increase in the normal retirement age can impact your benefits when you retire. While we certainly hope that any amendments would be phased in gradually, it’s important to be aware of these trends so you can properly plan for your own retirement.

What the Future Might Hold

As life expectancies continue to increase, it’s very likely that the normal retirement age will rise as well. Realistically, this is the only way to help keep the Social Security program financially solvent. As it is, the program was not made to support people for as long as it is now currently required to do. However, increasing the normal retirement age has some pretty serious consequences.

For starters, it’s unclear whether or not the labor market could support workers for those additional years as senior employees delay their retirements until Social Security kicks in. Additionally, some jobs are more physically demanding than others. While office workers may reasonably be able to delay retirement until 67 or later, those in jobs that require physical labor generally cannot do so. Where would increasing the normal retirement age leave these individuals?

Currently, Social Security is projected to deplete its funds between 2034 and 2038. To say the least, the future of Social Security is uncertain, and there will no doubt be an attempt at restructuring the program in the future.

While it’s unclear exactly how the issues with Social Security will be addressed, it’s important to start planning and saving for delayed Social Security benefits in the future, especially if you still have a decade or more until you retire. If you must retire before your full Social Security benefit is available to you, your retirement savings will be your primary (and possibly your only) source of income after retirement.

The Importance of Tax Planning in Retirement

With the future of Social Security in question, it’s more important than ever to get the most out of your retirement income. Many people don’t fully understand how their retirement income is taxed—and, yes, Social Security income can be taxed as well. Fully understanding your tax situation is just as important in retirement, if not more, than it is when you’re earning a paycheck or have regular business income.

We help you to better understand how your retirement income is taxed so that you can make tax-smart decisions in handling your income streams. Drawing on the right accounts at the right times, and even taking Social Security at the right time, can have a major impact on your tax liability. We can help you plan for your taxes during your retirement years so that you keep more in your pocket and can spend less time worrying about your financial stability in the years to come.

Make Tax Planning Part of Your Retirement Plan

At Peter Witts CPA, we believe that tax planning is not just about taxes. It’s about your long-term financial plan and the big picture of your financial future. That’s why we care about educating our clients on matters like the rising age of retirement and the future of Social Security, and it’s why we encourage you to make tax planning a part of your overall retirement plan. Contact us today to speak with one of our tax planners, and learn more about how a professional tax plan can protect your retirement income and help you feel more secure throughout your retirement years.