Starting January 1, 2025, adjustments to Social Security’s full retirement age (FRA) will take effect, impacting individuals born in 1959. This change is part of a gradual shift introduced in 1983 to ensure the long-term sustainability of the Social Security system.
What’s Changing?
For individuals born in 1959, the FRA will increase to 66 years and 10 months. This adjustment is part of a phased plan to incrementally raise the FRA for those born between 1955 and 1960. By 2027, the FRA will reach 67 for people born in 1960 or later.
This shift is significant for those nearing retirement age, especially individuals who will turn 62 in 2025, the earliest age at which benefits can be claimed. While claiming benefits at 62 remains an option, it comes with a permanent reduction in monthly payments. The reduction is calculated based on how many months before the FRA benefits are claimed, meaning early retirees could see larger reductions compared to prior generations.
Why Is the FRA Increasing?
The adjustment stems from legislation passed in 1983 aimed at addressing funding challenges faced by the Social Security system. As life expectancies rise and retirees spend more years collecting benefits, the system has experienced financial strain.
Gradually raising the FRA helps balance incoming payroll tax revenue with outgoing benefit payments. This strategy not only supports the system’s solvency but also encourages retirees to make informed decisions about when to begin collecting benefits.
Strategic Choices for Retirees
The change underscores the importance of planning for retirement. Workers who delay claiming benefits until after their FRA can receive increased monthly payments, while those who claim early must weigh the trade-off of reduced payments received over a longer period.
For instance, someone claiming benefits at 62 instead of waiting until their FRA of 66 years and 10 months would face a reduction of nearly 30% in their monthly payment. However, delaying beyond the FRA can result in an annual increase of up to 8% in benefits until age 70.
What’s Next?
As the FRA continues to rise, understanding these changes is crucial for workers approaching retirement. Whether you plan to retire early, at your FRA, or later, careful planning can help maximize the benefits you receive over the course of your retirement.
The Social Security Administration encourages individuals to use its online tools and resources to calculate how the FRA changes may affect their benefits and plan accordingly.
