The full retirement age (FRA) for Social Security is set to increase in 2025. This means those nearing retirement will have to wait a little longer to claim full benefits. In the past, the FRA was 65.
But reforms started in 1983 have gradually raised it to 67. This has happened in two-month steps over 22 years. Next year, the FRA will rise to 66 years and 10 months for those born in 1959.
These individuals can qualify for full benefits starting in November 2025. Retirees can begin collecting Social Security as early as age 62. But doing so results in a permanent reduction in monthly benefits by up to 30%.
It depends on how early they claim. On the other hand, delaying claims can increase benefits. The program offers a bonus of up to 8% for those who wait until they reach the maximum benefit eligibility age.
The FRA increase in 2025 is the second-to-last change under the 1983 law. The final adjustment will impact workers born in 1960 or later.
Raising retirement age and benefits adjustments
They will need to wait until they turn 67 to receive full benefits. This means a worker born in 1960 will have to wait until their birth month in 2027 to claim full benefits. Social Security beneficiaries will also see a 2.5% cost-of-living adjustment (COLA) in 2025.
This is to account for inflation. It is the smallest increase since 2021. But it aims to ensure that retirees’ purchasing power is not reduced by rising prices.
The new COLA will take effect with January benefit distributions. Social Security’s finances have been strained by the aging U.S. population. Retirements among Baby Boomers have also contributed.
The falling ratio of workers to retirees has led to concerns about the program’s sustainability. The Social Security trust fund is projected to be depleted by 2033. This could result in a 21% reduction in benefits across the board.
The nonpartisan Committee for a Responsible Federal Budget (CRFB) has indicated this. Such a reduction would mean a $16,500 nominal benefit cut for a typical dual-income couple retiring at the time of trust fund depletion. A single-income couple would see a $12,400 reduction, according to the CRFB.
