The full Social Security retirement age will increase in 2025. Here’s what you should know.

Most Americans assume the standard retirement age is 65, but the so-called “full retirement age” for Social Security is already higher than that — and will reach an even higher age in 2025.

The Social Security full retirement age (FRA) refers to the point at which employees can start receiving their full benefits. This is based on the number of years they have worked as well as their income during their working years. The longer someone works and the higher their income, the more they can receive from Social Security when they eventually claim their benefits.

While the FRA was previously 65, Congress revised the program in 1983 to raise the retirement age threshold to reflect longer life expectancy.

As part of this revision, the FRA was increased by two months based on a person’s year of birth. For example, people born in 1957 reached their FRA when they turned 66 years and 6 months, or as of 2023; However, people born in 1958 must reach 66 years and 8 months to be eligible for full benefits, or beginning in September 2024.

The full retirement age is to be raised again by two months to 66 years and 10 months for people born in 1959. This means that starting in 2025, the higher FRA will go into effect for this cohort, and people born in 1959 will begin becoming eligible for their full benefits in November 2025. (You can use this Social Security Administration page to calculate when you might receive your full benefits .)

Of course, there is flexibility when claiming social security benefits. People can claim as early as age 62, but the downside is a reduced benefit tied to the remainder of their retirement.

For example, if you claim at age 62, you’ll receive a benefit that’s about 30% less than your full pension – a sacrifice many older Americans are choosing to make as many are forced to retire earlier than expected or because they believe it makes more sense to claim more years of guaranteed retirement income, even if it is lower.

While raising the retirement age is nothing new, it might surprise some older workers because even if you file a claim a month before your FRA, your benefits will be reduced, albeit to a lesser extent than at age 62. And the difference in waiting until FRA compared to age 62 can be financially significant, with the Social Security Administration noting that someone retiring at FRA in 2024 could receive a maximum monthly benefit of $3,822, while someone claiming at age 62 could receive a maximum of $3,822, up from $2,710.

Each year, Social Security benefits are adjusted for inflation so that recipients’ purchasing power does not decline over time. In 2025 the annual Cost of Living Adjustment will be 2.5%, the smallest annual COLA increase since 2021 due to cooling inflation.

For most Social Security recipients, the new COLA will take effect upon payment in January.

Young Boomers and Generation Xers

The FRA increase for people born in 1959 marks the second-to-last age transition, with the final jump occurring for workers born in 1960 or later. These Americans cannot claim their FRA until they turn 67, meaning someone born in January 1960 will have to wait until January 2027 to receive their full retirement benefits.

This will particularly affect the youngest baby boomers and Generation X, with the latter generation ranging from 1965 to 1980.

However, according to recent research, these workers are the least prepared for retirement. The youngest baby boomers — those born between 1959 and 1965 — began turning 65 this year, but many of them lack sufficient savings to support themselves in retirement, according to the ALI Retirement Income Institute found Earlier this year.

According to the study, about one in three of these younger baby boomers will rely on Social Security benefits for at least 90% of their retirement income by age 70. However, Social Security benefits are intended to replace approximately 40% of a person’s earned income.

Also the generation The average retirement savings of Generation X households is about $150,000 – well below average 1.5 million dollars that Americans say they need to retire comfortably. Another study found that about 40% of Generation X haven’t saved a dime for retirement.

Meanwhile, older Americans can also maximize their Social Security benefits by delaying filing until they turn 70. At this point, benefits will increase by approximately 25% above full benefits. But only about 4% of Americans wait until they are 70 to claim the maximum Social Security benefit. after This emerges from a recent study by the Transamerica Center for Retirement Studies.