If you are planning for retirement, it’s essential to understand how Social Security benefits work and how recent changes might impact your financial planning. One of the most significant changes in 2025 is the increase in the Social Security full retirement age (FRA) for Americans born in 1959.
This change will push the FRA to 66 years and 10 months, rather than the traditionally recognized age of 65. The full retirement age is the age at which individuals can claim 100% of their Social Security benefits based on their lifetime earnings and work history.
What is the Full Retirement Age (FRA)?
The FRA is the age at which you can begin receiving your full Social Security benefits without any reduction. For many years, the standard FRA was 65, but this is changing. As life expectancy increases and more people are living longer, Congress made the decision to gradually raise the FRA over several decades.
In 2025, Americans born in 1959 will see their FRA increase to 66 years and 10 months. For those born in 1960 or later, the FRA will be 67. This shift is part of a larger effort to maintain the sustainability of the Social Security system, especially as people live longer and retire at older ages.
What Happens If You Claim Social Security Early?
While it may seem tempting to claim Social Security benefits as early as possible at age 62, this decision comes with long-term consequences. If you claim benefits at age 62, your monthly payment will be permanently reduced by as much as 30%. This means that you will receive significantly less money over your lifetime.
On the other hand, if you wait to claim your benefits until you reach the full retirement age, you will receive the full amount based on your work history. Additionally, delaying benefits until age 70 can further increase your monthly payment by up to 32%.
Why is the Full Retirement Age Changing?
The increase in FRA is the result of reforms passed in 1983. Congress raised the FRA in response to rising life expectancy and demographic shifts in the population. By gradually increasing the FRA, lawmakers aimed to make sure that Social Security remains financially sustainable for future generations.
For instance, the FRA for those born in 1958 is set at 66 years and 8 months, while for those born in 1959, it increases to 66 years and 10 months. The FRA will eventually settle at 67 for people born in 1960 or later. As you can see, the age increases slightly each year, and this process will continue for the foreseeable future.
What Should You Consider When Making the Decision?
Deciding when to claim Social Security benefits is a personal choice that requires careful consideration. Many factors come into play, including your health, family history, marital status, and financial needs.
Financial planners often advise future retirees to keep their fixed expenses as low as possible. This way, you can have more flexibility to cover unexpected costs and enjoy some extra spending money.
It’s also worth noting that delaying your benefits until age 70 can be particularly beneficial for married couples, as it boosts survivor benefits for your spouse.
However, claiming benefits earlier may be the best option for some people, especially if they have health concerns or pressing financial needs. It’s also crucial to understand that not everyone can afford to wait until age 70 to claim their benefits.
Younger baby boomers and Gen Xers may feel the greatest impact, as many are not adequately prepared for retirement.
How Does the Change Affect Your Retirement Planning?
The shift in the full retirement age is just one of several changes to Social Security in 2025. Other adjustments include a smaller-than-expected cost-of-living adjustment (COLA) of 2.5% and an increase in the maximum amount of earnings subject to Social Security tax, which will rise to $176,100, up from $168,600 in the past year.
Moreover, in-person services at the Social Security Administration will be by appointment only, and the income limits for working beneficiaries will also change. Those under FRA can earn up to $23,400 before their benefits are reduced, while those who have passed FRA can make up to $62,160 without any adjustments to their payments.
The changes to the full retirement age in 2025 highlight the importance of timing when it comes to claiming Social Security benefits. While you can start receiving benefits at age 62, doing so will result in a permanent reduction in your monthly check.
Waiting until your FRA or even age 70 could significantly increase your payments, especially if you’re married or have a healthy financial plan. It’s essential to evaluate your unique situation and consult a financial planner to ensure that you make the best decision for your retirement.
