Coming up on retirement? People may have to wait a little longer to get a bigger payout from Social Security because the “full retirement age” is going to go up next year. At the start of Social Security in the 1930s, the full retirement age (FRA) was 65.
But in 1983, changes were made that raised the FRA from 65 to 67 every two months for 22 years, starting with people who turned 62 in 2000. For people born in 1959, the full retirement age will rise to 66 years and 10 months the following year. From November 2025 on, they would be able to get their full share of Social Security benefits.
The new changes in retirement age that Social Security beneficiaries should be aware
People who are retired can start getting Social Security payments before they reach the full retirement age. The youngest age to do this is 62. But if a retiree files their claim too late, their monthly income could be cut by up to 30% for good.
Also, Americans can get an extra 8% in Social Security benefits if they wait until they reach the age at which they can get the biggest payment. This means that putting off their claim can be beneficial.
The FRA will go up in 2025, which is the second-to-last age change that will happen under the 1983 Social Security reform law. Things could change in the future, though.
For workers born in or after 1960, the last change means they will have to wait until they are 67 years old to reach the full retirement age. In other words, a worker born in 1960 would not be able to get full benefits until 2027, the month of their birth.
Also, people who get Social Security payments will likely get a cost-of-living adjustment (COLA) of 2.5% in the next year to account for inflation. The COLA is meant to keep retirees’ spending power from going down over time by raising benefits to keep up with rising prices in the economy.
After reaching its highest level in forty years in 2022, inflation in the U.S. has been going down over the last two years. However, prices are still high and making it hard for people to stick to their budgets. Since 2021, the 2.5% COLA is the lowest it has been.
The new CPI will start to be applied when most Social Security recipients get their January benefit payments. There is a trust fund that helps pay for some benefits that are not covered by taxes, but most of Social Security’s money comes from payroll taxes.
The program’s finances are also in danger of going bankrupt because fewer people are working and more Baby Boomers are retiring. This is because the American population is getting older and more Baby Boomers are retiring.
The independent Committee for a Responsible Federal Budget (CRFB) says that the main trust fund for Social Security, the Old Age and Survivors Insurance Trust Fund, will run out of money in 2033.
This will mean that benefits will be cut by 21% overall. The CRFB says that a typical couple with two incomes who retired when the trust fund ran out would have lost $16,500 in benefits, while a typical couple with only one income would have lost $12,400.
How can beneficiaries receive the highest monthly payment next year?
It may also be in your best interest to wait a little longer to claim your benefits. When you reach full retirement age, your payment goes up by 8% every year for every full year you wait to claim your benefits.
This credit for putting off retirement grows until age 70. For example, the Social Security Administration website says that the most you could get from Social Security this year if you claim it at your “full retirement age” is $3,822.
But if you file this year at age 62, the most you could get is $2,710. If you file this year and are at least 70 years old, the most you can get is $4,873.
People choose to apply for Social Security based on their own needs and circumstances, such as their job, health, family, and medical history. There is an online Social Security resource center run by the American Association of Retired Persons (AARP).