The United States is set to increase the Full Retirement Age (FRA) for Social Security benefits starting in 2025. This change will affect millions of future retirees who rely on Social Security for their financial stability. Starting in 2025, people born in 1959 will see their FRA increase to 66 years and 10 months.
This is part of a gradual increase in the FRA, which will reach 67 for those born in 1960 or later. The increase is meant to adjust for longer life expectancies and ensure the Social Security system is sustainable. Social Security allows people to start collecting benefits as early as age 62, but this comes with a penalty of about 29.17% less per month compared to claiming at FRA.
For a retiree expecting $2,000 per month at FRA, claiming benefits at 62 would reduce the monthly benefit to about $1,417. Delaying retirement beyond the FRA increases Social Security benefits by about 8% per year until age 70. For example, a monthly benefit of $2,000 at FRA could increase to $2,640 if retirement is delayed until 70.
Social Security’s 2025 changes explained
To account for inflation, Social Security benefits will see a Cost-of-Living Adjustment (COLA) of 2.5% in 2025. This adjustment will increase the average monthly Social Security check by about $49.
Many retirees choose to continue working while receiving Social Security benefits. However, for those who claim benefits before their FRA, there is an earnings limit. In 2025, the earnings limit will be $23,400.
Earnings over this amount will result in a $1 reduction in benefits for every $2 earned. The gradual increase in the FRA means that younger generations will need to wait longer to receive their full benefits. This shift highlights the importance of planning longer careers, emphasizing personal savings to bridge income gaps, and considering delayed Social Security claims to maximize benefits.
To plan for retirement in 2025 and beyond, it is important to calculate your expected benefits, decide on the best age to claim benefits, consider additional savings, and work with a financial advisor. A financial expert can help optimize your retirement strategy based on your unique situation.
