A law passed in the 1980s, which gradually increased the full retirement age for collecting Social Security benefits, will impact individuals retiring in 2025. This change primarily affects those born between 1943 and 1959. For individuals born on or after 1960, the full retirement age is set at 67.
As people prepare for retirement, it’s crucial to double-check their calculations to understand when they can claim full Social Security benefits. The law was designed to account for increasing life expectancy, gradually shifting the age from 65 to 67. For example, individuals born in 1957 reached their full retirement age—66 years and 6 months—in 2023.
Those born in 1958 would need to be 66 years and 8 months old, and individuals born in 1959 will reach their full benefits eligibility in 2025, depending on their birth month. Historically, the typical age of retirement was 65, but the adjustment began for those born in 1938 or later. The retirement age has increased by two months for each subsequent birth year up until those born in 1960 or later, who now face a full retirement age of 67.
For those planning to retire, it’s important to note that claiming benefits before the full retirement age results in reduced payments. For instance, an individual might see a 25-30% reduction if they choose to receive benefits early. However, delaying benefits until age 70 can result in a higher monthly payment.
While the increase in the retirement age isn’t new, it might catch some older workers by surprise. Claiming even a month earlier than FRA will reduce benefits, although less drastically than at age 62. The difference in waiting until FRA versus 62 years old can be financially significant, with the Social Security Administration noting that someone retiring at FRA in 2024 could receive a maximum monthly benefit of $3,822, while someone claiming at 62 would receive a maximum of $2,710.
Social Security changes impact retirement planning
Each year, Social Security benefits are adjusted to account for inflation so beneficiaries’ purchasing power doesn’t erode over time. In 2025, the annual cost-of-living adjustment (COLA) will be 2.5%, the smallest annual COLA hike since 2021 due to cooling inflation.
For most Social Security beneficiaries, the new COLA goes into effect with their January payment. The increase in the FRA for people born in 1959 marks the penultimate age change, with the final jump occurring for workers born in or after 1960. Those Americans won’t be able to claim their FRA until they hit 67 years old, which means that someone born in January 1960 must hold off until January 2027 to get their full retirement benefits.
This change primarily impacts the youngest baby boomers and Gen Xers, with the latter generation spanning 1965 to 1980. These workers, however, are among the least prepared for retirement, according to recent research. The youngest boomers — those born between 1959 and 1965 — started to hit 65 this year, but many lack adequate savings to support themselves in old age.
About 1 in 3 of these younger boomers will rely on Social Security benefits for at least 90% of their retirement income when they are 70, but Social Security benefits are designed to replace about 40% of a person’s working income. Gen X, meanwhile, is also shaping up to hit retirement without enough savings. The average retirement savings of Gen X households is about $150,000 — far below the roughly $1 million that Americans say they need to retire comfortably.
Another study found that about 40% of Gen Xers don’t have a penny saved for retirement. Older Americans can maximize their Social Security benefits by delaying claiming until they turn 70 years old. At that point, benefits can be boosted about 25% higher than their full benefits.
However, only about 4% of Americans wait until they’re 70 to claim the maximum Social Security benefit, according to a recent study from the Transamerica Center for Retirement Studies.
