Social Security’s Full Retirement Age (FRA), when people can claim their full benefits, is set to increase again in 2025. Most Americans are familiar with the concept of retiring at 65, but the FRA is actually higher and varies depending on the year of birth. The adjustment to FRA is a result of the 1983 overhaul, which was implemented to account for longer life expectancies. Here’s what you should know about this change:
Key Points:
- Full Retirement Age Increases in 2025
For those born in 1959, the FRA will rise to 66 years and 10 months, starting in November 2025. This is part of a gradual increase that began after Congress changed the rules in 1983. - Eligibility for Full Benefits
FRA is the age when individuals can start claiming full Social Security benefits without penalty. While people can choose to claim benefits at age 62, it comes at a reduced rate—about 30% less than the full amount. However, waiting until FRA ensures a larger monthly payout. - Delayed Benefits
If you delay claiming Social Security until you are 70, your benefits will increase by about 25%, but only around 4% of Americans choose to wait that long. - Impact on Younger Generations
The increase in FRA will mainly affect the youngest boomers and Gen Xers, particularly those born after 1960. The final increase will be for individuals born in 1960 or later, who will have to wait until 67 to claim their full benefits. - Retirement Readiness
Many younger boomers and Gen Xers are financially unprepared for retirement, with Gen X having the lowest savings rate. About 40% of Gen Xers have no retirement savings at all, and many will have to rely on Social Security for the majority of their retirement income, which is only designed to replace about 40% of pre-retirement earnings. - Cost-of-Living Adjustment (COLA)
In 2025, Social Security benefits will be adjusted with a 2.5% COLA, reflecting the smallest adjustment since 2021, driven by lower inflation.
In conclusion, while the increase in FRA might come as a surprise to some, it is part of a long-term trend. Individuals should plan their retirement strategy early, taking into account both their retirement savings and Social Security benefits to ensure financial security in their later years.
