People approaching retirement may need to wait a little longer to receive a larger payout, as Social Security’s “full retirement age” is expected to rise next year.
When Social Security was founded in the 1930s, the full retirement age (FRA) was 65. However, in 1983, changes were made to raise the FRA from 65 to 67 in two-month increments over 22 years, beginning with individuals turning 62 in 2000.
The full retirement age will rise to 66 years and 10 months for those born in 1959 the following year. Beginning in November 2025, they would be eligible for their full Social Security benefits.
The new changes in retirement age that Social Security beneficiaries should be aware
Retirees can begin receiving Social Security payments before they reach full retirement age;
the minimum age is 62. However, depending on how early a retiree files their claim, their monthly income could be permanently reduced by up to 30%. Furthermore, Social Security provides a bonus of up to 8% for Americans who wait until they reach the age when they are eligible to receive the maximum payment, allowing them to benefit from delaying their claim.
Although things may change in future revisions, the 2025 FRA increase is the next-to-last age modification under the 1983 Social Security reform law.
Workers born in or after 1960 would be subject to the final adjustment, which would require them to wait until age 67 to reach the full retirement age.
This means that a worker born in 1960 will not be eligible for full benefits until their birth month in 2027. In addition, Social Security beneficiaries are expected to receive a 2.5% cost-of-living adjustment (COLA) for their payments in the coming year to account for inflation.
The COLA’s purpose is to keep retirees’ spending power from declining over time by increasing benefits in response to rising economic prices.
Inflation in the US economy has decreased over the last two years after reaching its highest level in forty years in 2022, but prices remain high, putting a strain on household budgets.
The 2.5% COLA is the lowest rate since 2021. When most Social Security recipients receive their January benefit installments, the new COLA will take effect. Although a trust fund is used to pay out benefits that are not covered by incoming tax collections, payroll tax receipts make up the vast majority of Social Security funding.
Furthermore, the program’s finances are in danger of going bankrupt as a result of the reduction in the worker-to-retiree ratio caused by the aging of the American population and the retirement of Baby Boomers.
The independent Committee for a Responsible Federal Budget (CRFB) estimates that the Old Age and Survivors Insurance Trust Fund, Social Security’s primary trust fund, will run out of money in 2033, resulting in a 21% reduction in overall benefits.
According to the CRFB, a typical dual-income couple who retired around the time the trust fund was depleted would have received a $16,500 benefit cut, while a typical single-income couple would have lost $12,400.
How can beneficiaries receive the highest monthly payment next year?
Waiting a little longer to claim your benefits may also be beneficial. After reaching full retirement age, your payment increases by 8% per year for each full year you delay benefit claims.
The amount of the postponed retirement credit increases until age 70. For example, the Social Security Administration website states that if you claim Social Security this year at your “full retirement age,” your maximum payout will be $3,822.
However, if you claim this year at age 62, the maximum benefit is $2,710. If you claim this year at age 70 or older, the maximum benefit is $4,873.
The decision to apply for Social Security is entirely personal, influenced by factors such as employment, health, family, and medical history. The American Association of Retired Persons (AARP) maintains an online Social Security resource center.