Starting in 2026, changes to the Social Security retirement system will set the full retirement age (FRA) to 67 for people born in 1960 and after. This is the last milestone in the gradual changes made to the system introduced decades ago in response to longer retiree life expectancies and the upper-working-age population. Having more early retirees negatively impacts the revise system as retirees will cash out 30% less than expected at 62.
Why the Retirement Age is Increasing
In signing the original Social Security Act in 1935, the retirement age was pegged at 65 as life expectancy at the time was 61. It is now 79, with life expectancy continuing to rise. On top of this, the number of workers relative to retirees is circa 3.5 and falling. These demographic and economic trends mean Social Security will require amendments. It was to this end that the 1983 amendments started the gradual increases to the retirement age, with 1991 as the baseline, and culminating with the FRA at 67 by 2026.
Effect on Early Retirees
Retiring early at 62 will mean receiving less benefits—up to 30% less than if they waited to get to full retirement age. This penalty will be permanent. This is constructed in a way to discourage extended early retirement and to ease pressure on early benefit claims. This means recipients will have to overweight financial benefits and to lifetime benefits in the long run.
| Year of Birth | Full Retirement Age | Early Retirement Benefit Reduction (at age 62) |
|---|---|---|
| 1960 or later | 67 | Up to 30% |
| 1959 | 66 years, 10 months | Slightly less than 30% |
| 1958 | 66 years, 6 months | Around 27.5% |
More Important Changes in 2026
The increase in the FRA will mean more and higher changes—especially in the Social Security tax limits. This will mean the max taxable earnings for the Social Security tax will increase from $176,100 to about $183,600. The higher Social Security tax will mean the wage limits on how much benefit recipients will be able to earn without benefits getting cut off will also be updated. For recipients below FRA, earnings above $24,360 will cut benefits and for the 2026 FRA, the limit will be $64,800. After FRA, your benefits will not be reduced no matter how much you earn.
Retirement Landscape Changes
These adjustments highlight the significance of planning for retirement. Waiting to claim benefits until the full retirement age — and even beyond — not only avoids penalties, but also adds 8 percent to monthly benefits each year until age 70. Beneficiaries also need to be informed of the costs associated with the 2026 COLA, which will bring benefits increases higher than the expected rise in Medicare premiums.
FAQs
Q1: How much can early retirement reduce Social Security benefits?
A: Benefits can be reduced by 30 percent if claimed in age 62.
Q2: Are there other Social Security changes in 2026?
A: Yes, including an increased taxable earnings limit and updated earning thresholds for benefit reductions.
As the age for the new retirement Social Security law changes to 67 and with early retirement benefits being considerably reduced, strategic planning is extremely important for the American public.
