Social Security’s full retirement age (FRA) is set to rise again in 2025, impacting those nearing retirement who want to claim their full benefits. The FRA, which was initially set at 65 when the program began in the 1930s, has gradually increased due to reforms enacted in 1983. This law raised the FRA from 65 to 67 in two-month increments over a 22-year period starting in 2000.
In 2025, the FRA will increase to 66 years and 10 months for individuals born in 1959. These individuals will be eligible for their full Social Security benefits beginning in November 2025. The final step in this phased increase will apply to those born in 1960 or later, setting the FRA at 67 years. Workers born in 1960 will need to wait until their birth month in 2027 to claim full benefits.
Retirees can claim Social Security benefits as early as age 62, but doing so results in a permanent reduction of up to 30%, depending on how early they claim. Conversely, delaying benefits past the FRA can provide an annual increase of up to 8% until the maximum benefit age of 70.
In addition to the FRA increase, Social Security recipients will receive a 2.5% cost-of-living adjustment (COLA) in 2025 to account for inflation. This is the smallest COLA since 2021, reflecting the easing of inflation after it peaked in 2022. Despite inflation cooling, prices remain high, placing continued pressure on household budgets. The new COLA will take effect with January 2025 benefit payments.
Social Security benefits are primarily funded through payroll taxes, but the program also relies on the Old-Age and Survivors Insurance Trust Fund to cover shortfalls. The aging U.S. population and Baby Boomer retirements have strained the program’s finances. The trust fund is projected to be depleted by 2033, which would lead to a 21% across-the-board benefit cut unless reforms are enacted.
According to the nonpartisan Committee for a Responsible Federal Budget (CRFB), this depletion could result in a $16,500 benefit reduction for a typical dual-income couple or a $12,400 reduction for a single-income couple retiring at that time.
Without significant reforms, Social Security’s financial challenges may worsen, underscoring the need for potential policy changes to secure the program’s future.
