Social Security’s “full retirement age” is set to increase next year, meaning that those nearing retirement will have to hold off a little longer before they can claim a larger benefit.
The full retirement age (FRA) for Social Security was 65 when the program was created in the 1930s, but reforms made in 1983 gradually increased the FRA from age 65 to 67 in two-month increments over a 22-year period that started for those who turned 62 in 2000.
Next year, the FRA will rise to 66 years and 10 months for people born in 1959. They would start to qualify for their full Social Security benefits starting in November 2025.
Retirees can begin collecting their Social Security benefits before they reach the FRA, with the minimum age to do so being 62. However, retirees who claim early will have their monthly benefit permanently reduced by as much as 30% depending on how early they claim.
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Americans can also delay claiming Social Security benefits and be rewarded for doing so, as the program offers a bonus of up to 8% for waiting until the age when they’re eligible to receive the maximum benefit.
The increase in the FRA coming in 2025 is the next-to-last age change that will occur under the Social Security reform law that was enacted in 1983, although that could change with future reforms.
The final change will apply to workers born in or after 1960 and will require that those workers wait until they turn 67 to achieve the FRA, meaning that a worker born in 1960 would have to wait to claim benefits until they reach their birth month in 2027 to get their full benefits.
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Social Security recipients are also on track to receive a 2.5% cost-of-living adjustment (COLA) for their benefits next year to account for inflation. The COLA increases benefits to account for rising prices of goods in the economy so that retirees don’t see their purchasing power diminished over time.
The 2.5% COLA is the smallest since 2021 and comes as inflation in the U.S. economy has eased in the last two years after it reached the highest level in four decades in 2022, though prices remain elevated and are straining household budgets.
The new COLA will take effect for most Social Security recipients when they receive their January benefit distributions.
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Social Security benefits are funded largely through payroll tax receipts, although it does rely in part on a trust fund to pay out benefits that aren’t covered by incoming tax receipts.
The falling ratio of workers to retirees caused by the aging of the U.S. population and retirements among members of the Baby Boomer generation have strained the program’s finances, which are trending toward insolvency.
Social Security’s primary trust fund, the Old-Age and Survivors Insurance Trust Fund, is projected to be depleted in 2033, which would cause a 21% across-the-board benefit cut, according to the nonpartisan Committee for a Responsible Federal Budget (CRFB).
That would amount to a $16,500 nominal benefit reduction for a typical dual-income couple who retired at the time of the trust fund’s depletion, or a $12,400 reduction for a typical single-income couple, per the CRFB.
*This story was originally published on 12/18/24.
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