The age for full retirement benefits from Social Security will rise in 2025. Here’s what you need to be aware of.
While many Americans view 65 as the typical retirement age, the actual “full retirement age” for Social Security is already set above that threshold and is poised to increase even further in 2025.
The full retirement age (FRA) for Social Security indicates the point at which individuals are eligible to receive their complete benefits, determined by their years of employment and earnings throughout their careers. The duration of employment and the level of earnings directly influence the amount one can expect to receive from Social Security upon claiming benefits.
Previously set at 65 years, the retirement age threshold was revised by Congress in 1983 to reflect increasing life expectancies.
In the course of this overhaul, the FRA has been gradually increasing by two months at a time, determined by an individual’s birth year. For example, individuals born in 1957 attained their full retirement age at 66 years and 6 months, beginning in 2023. Conversely, those born in 1958 will need to reach 66 years and 8 months to be eligible for their complete benefits, starting in September 2024.
The retirement age will rise once more, extending by two months to 66 years and 10 months for individuals born in 1959. The increased full retirement age for that group will take effect in 2025, allowing individuals born in 1959 to begin receiving their complete benefits starting in November 2025.
Indeed, there is some leeway regarding the timing of claiming Social Security benefits. Individuals are eligible to start claiming benefits upon reaching the age of 62, but this comes with the consequence of receiving a lower amount that remains fixed throughout their retirement years.
For example, choosing to claim at 62 leads to a benefit that is roughly 30% lower than the full amount — a decision that numerous older individuals make, often due to unexpected early retirement or the belief that receiving a smaller, guaranteed income over a longer period is more advantageous.
Annually, adjustments are made to Social Security benefits to ensure that the purchasing power of beneficiaries remains intact in the face of inflation. The annual adjustment for the cost of living in 2025 will be set at 2.5%, marking the lowest increase since 2021 as inflation continues to ease.
The upcoming adjustment will take effect for the majority of beneficiaries with their payment in January.
Impact on GenX and Boomers
The rise in the FRA for individuals born in 1959 signifies the second-to-last adjustment in age, with the ultimate shift taking place for those born in or after 1960. Individuals in the U.S. will have to wait until they reach 67 years of age to access their full retirement benefits, meaning that those born in January 1960 will need to wait until January 2027 to receive the complete amount.
The primary effects will be felt by the youngest members of the baby boomer generation and those in Generation X, which includes individuals born between 1965 and 1980.
Recent research indicates that these workers are among the most unprepared for retirement. This year marks a significant milestone for the youngest members of a certain generation, born from 1959 to 1965, as they reach the age of 65. However, a recent study by the ALI Retirement Income Institute reveals that a considerable number of these individuals do not have sufficient savings to sustain themselves in their later years.
According to the study, approximately one-third of younger boomers are expected to depend on Social Security benefits for at least 90% of their retirement income by the age of 70. Social Security benefits aim to cover roughly 40% of an individual’s earnings from their job.
Generation X is on track to enter retirement lacking sufficient savings for their later years. Gen X households have an average retirement savings of approximately $150,000, which is significantly less than the estimated $1.5 million that many Americans believe is necessary for a comfortable retirement. A recent study revealed that nearly 40% of Gen X individuals have no savings set aside for retirement.
In the meantime, seniors can enhance their Social Security benefits by postponing their claims until they reach the age of 70. At that stage, an individual’s benefits are enhanced by approximately 25% above their full benefits. A recent study from the Transamerica Center for Retirement Studies reveals that merely 4% of Americans choose to wait until the age of 70 to secure the highest Social Security benefit.
