Changes to Social Security’s full retirement age (FRA) will start on January 1, 2025, and will affect people born in 1959. This change is part of a series that started in 1983 to make sure that Social Security would be around for a long time.
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 change is because of a law that was passed in 1983 to help the Social Security system with its money problems. The system is having trouble paying its bills because people are living longer and getting benefits for longer.
Gradually raising the FRA helps keep the amount of money coming in from payroll taxes and going out for benefits equal. This plan not only helps the system stay solvent, but it also encourages retirees to be smart about when they start getting benefits.
Strategic Choices for Retirees
This change makes it even more important to plan for retirement. If a worker waits to claim benefits until after their FRA, they may get higher monthly payments. On the other hand, if they claim benefits early, they may get less money over a longer period of time.
For example, if someone started getting benefits at age 62 instead of waiting until they reached their FRA of 66 years and 10 months, they would have to pay about 30% less each month. But if you wait past the FRA, your benefits can go up by up to 8% each year until you turn 70.
What’s Next?
As the FRA keeps going up, workers who are getting close to retirement need to understand these changes. Preparing ahead of time can help you get the most out of your retirement, whether you want to retire early, at your FRA, or later.
People are encouraged by the Social Security Administration to use its online tools and resources to figure out how the changes to the FRA might affect their benefits and make plans based on that information.
