The full retirement age (FRA) for Social Security benefits is set to rise again in 2025, continuing a trend that has been in place since 1983. Although 65 has long been considered the typical retirement age, Social Security’s FRA has already surpassed that mark and will increase further, affecting how and when retirees can claim their full benefits. Here’s what we know so far about this change and how it will impact retirees.
What You Need to Know About the Increasing Retirement Age
The Social Security FRA is based on a worker’s birth year and the number of years they’ve worked, with longer service and higher income often leading to higher payouts. The increase in FRA began in 1983, in response to the rising life expectancy of Americans. Initially set at 65, the FRA has been rising by two months every year since then.
For example, individuals born in 1957 reached their FRA at 66 years and 6 months, while those born in 1958 will reach it at 66 years and 8 months in September 2024. The most recent change will affect individuals born in 1959, who will hit their FRA at 66 years and 10 months in November 2025.
The Impact of Rising FRA on Social Security Benefits
The Social Security Administration provides online tools to help people determine their FRA based on their birth year. For most people, deciding when to begin receiving Social Security benefits involves a trade-off: retiring earlier means lower monthly payments, while waiting longer can result in higher benefits. If benefits are delayed beyond the FRA, they can increase by 8% per year until age 70.
Experts recommend that individuals nearing retirement carefully evaluate when to begin claiming Social Security, taking into account factors such as health, other retirement savings, and anticipated living costs. By understanding these changes, retirees can better plan for their financial future.
Will the Increase in Retirement Age Lead to Cuts in Social Security Benefits?
While the goal of raising the retirement age is to account for longer life expectancies, the change will also reduce payments for new retirees. Those most dependent on Social Security, such as individuals with lower and moderate incomes, will likely feel the impact of these reductions the most. These groups have not seen the same increases in life expectancy as wealthier Americans, and many continue to face systemic inequalities in healthcare, education, housing, and employment that contribute to shorter lifespans.
Advocates for raising the retirement age argue that it’s necessary to prevent reductions in Social Security benefits if the program’s trust funds run out. However, there’s a significant irony in this argument: raising the retirement age would ultimately lead to a nearly 20% reduction in the average lifetime benefits for new retirees. This is the very outcome they claim to be trying to avoid. If Congress doesn’t act to extend the program’s reserves, beneficiaries could face a 23% reduction in payments across the board.
The Broader Debate on Social Security Reform
While raising the FRA may be seen as a necessary step to keep Social Security sustainable, it also raises important questions about fairness and the true impact on those who rely on it most. Critics of the policy argue that it disproportionately affects lower-income Americans, particularly those who have not experienced the same increases in life expectancy as wealthier individuals. These changes are already having a significant effect on retirees’ financial security, and further adjustments may widen the gap between the wealthy and the rest of the population.
As Congress continues to debate the future of Social Security, retirees and those approaching retirement age will need to stay informed about these changes to make the best decisions for their financial well-being. Understanding how the increase in the retirement age impacts Social Security benefits is crucial for planning a secure and stable future in retirement.
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