Many people are interested in increasing their Social Security benefits, as there are huge advantages to having a large retirement check. Unfortunately, future retirees won't have as many chances to increase their monthly income as those who have come before them.
Here's why it's getting harder to increase Social Security payments next year.
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Future retirees face this big issue with increasing Social Security benefits
Unfortunately, future retirees have a new cap on how much they can increase their monthly Social Security benefits because of the changes to the full retirement age.
FRA is the age when you're eligible to collect your standard benefit. This is the benefit you earn based on your inflation-adjusted wages in the 35 years when your earnings were the highest. When you claim your benefit at FRA, you get benefits equal to a percentage of those averaged earnings.
When you delay your claim, though, you get a higher monthly benefit for each month that you wait. The higher monthly benefit comes from delayed retirement credits, which are earned for each month after FRA until 70.
Delayed retirement credits can boost your benefit by a good amount. For each month you wait, your standard benefit is increased by two-thirds of 1%. This adds up to an 8% annual benefits increase. Since many people don't have enough in their retirement plans to effectively supplement Social Security, getting this benefit increase can be a big deal.
This is one reason why many people want to claim Social Security as late as possible. If you can get 8% more money from Social Security, that's less you have to take from your 401(k) or IRA. The more money Social Security provides, the easier your retirement planning becomes, since you don't have to rely on savings as much.
Unfortunately, in the past several years, and in the upcoming year, retirees are losing some chances to earn delayed retirement credits that increase their benefits. Here's why.
Retirees can't earn as many delayed retirement credits in 2026 and beyond
The problem for retirees is that there are now fewer chances to earn delayed retirement credits than there were in the past because full retirement age is moving later.
Specifically, FRA is:
- 66 for anyone born from 1943 to 1954.
- 66 and two months for anyone born in 1955.
- 66 and four months for anyone born in 1956.
- 66 and six months for anyone born in 1957.
- 66 and eight months for anyone born in 1958.
- 66 and 10 months for anyone born in 1959.
- 67 for anyone born in 1960 or later.
The change is happening because of reforms put in place to shore up Social Security in the 1980s. While it's been a long time coming, and it's not a surprise, the shifting FRA means that each year, there have been fewer months between FRA and 70 when delayed retirement credits could be earned.
For example, anyone born in 1954 could earn four full years of credits, or a 32% benefits increase. But people born in 1960 or after can earn a maximum of three years of credits, or a 24% increase. That's a big difference.
If your standard monthly benefit at your full retirement age would be $1,500 and you could boost it by 32%, you could end up with $1,980 in benefits. But if you can only increase it by 24%, you cap out at $1,860.
Retirees need to be aware of this when they're anticipating how much income they'll get from Social Security versus from retirement accounts like their IRA to help them make ends meet in their later years.
