Increase Social Security’s full retirement age in 2025

social security”Full retirement age“It is set to increase next year, meaning those nearing retirement will have to wait a little longer before they can claim larger benefits.

The full retirement age (FRA) for Social Security was 65 when the program was created in the 1930s, but reforms made in 1983 gradually increased the full retirement age from 65 to 67 in two-month increments over a 22-year period that began for those He turned 62 years old in 2000.

Next year, the FRA rate will rise to 66 years and 10 months for people born in 1959. They will begin to qualify for full Social Security benefits starting in November 2025.

Retirees can start collecting their money Social Security benefits Before they reach the FRA, with the minimum age to do so being 62 years old. However, retirees who claim early will have their monthly benefits permanently reduced by up to 30% depending on how quickly they claim.

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Americans can also delay claiming Social Security benefits and get rewarded for it, as the program offers a bonus of up to 8% for waiting until the age at which they become eligible for the maximum benefit.

The FRA increase coming in 2025 is the next to last age change that will occur under Social Security reform The law was passed in 1983, although this may change with future reforms.

The final change would apply to workers born in 1960 or later and would require those workers to wait until they turn 67 to realize the FRA, meaning a worker born in 1960 would have to wait to claim benefits until their birth month in 2027 to get their full benefits.

Social Security Crisis: Beneficiaries face a 21% cut in benefits without reforms, according to CRFB

Social security Beneficiaries are also on track to receive a 2.5% cost of living adjustment (COLA) to their benefits next year to account for inflation. COLA increases benefits to account for rising commodity prices in the economy so retirees don’t see their purchasing power diminish over time.

The COLA of 2.5% is the smallest since 2021 and comes as inflation in the US economy has eased in the past two years after reaching a four-decade high in 2022, although prices remain high and pressure on household budgets.

The new COLA will go into effect for most Social Security recipients when they receive their benefit distributions in January.

Social Security’s cost of living adjustment will be 2.5% in 2025, lower than the previous year

Social Security benefits are largely funded by… Payroll tax Receipts, though, rely in part on a trust fund to pay benefits not covered by incoming tax receipts.

The decline in the ratio of workers to retirees as a result of the aging US population and retirements among baby boomers has strained the program’s finances, which are heading toward insolvency.

Social Security’s primary trust fund, the Old-Age and Survivors Insurance Trust Fund, is expected to be depleted in 2033, potentially causing an overall drain of 21%. Interest cutAccording to the nonpartisan Committee for a Responsible Federal Budget (CRFB).

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This would amount to a reduction in nominal benefits of $16,500 for a typical dual-earner couple who retired at the time the trust fund was exhausted, or a reduction of $12,400 for a typical single-earner couple, according to the CRFB.