Social Security's full retirement age will increase in 2025

While many Americans associate the standard retirement age with 65, the official "full retirement age" (FRA) for Social Security has already surpassed that and is set to rise even further in 2025.

The FRA determines when workers can claim their full Social Security benefits, which are calculated based on their years of work and income levels. Higher incomes and longer work histories generally translate to higher Social Security benefits upon retirement.

Historically, the FRA was 65 years old, but Congress adjusted the system in 1983 to account for increased life expectancies. As part of that adjustment, the FRA has gradually increased by two months at a time, depending on an individual’s birth year. For example, those born in 1957 reached their FRA at 66 years and 6 months in 2023. People born in 1958 need to reach 66 years and 8 months to qualify for full benefits, with that milestone arriving in September 2024.

In 2025, the FRA will rise again by two months to 66 years and 10 months for individuals born in 1959. Consequently, this group will begin qualifying for their full benefits in November 2025. (You can determine your own FRA using the Social Security Administration’s online calculator.) Importantly, individuals have flexibility in deciding when to claim benefits. Social Security allows claims as early as age 62, but opting for early benefits results in a permanent reduction in monthly payments throughout retirement.

Impact on Younger Boomers and Gen Xers

The increase to 66 years and 10 months for those born in 1959 represents the second-to-last adjustment in the FRA schedule. The final shift will occur for people born in or after 1960, whose FRA will be 67. For example, someone born in January 1960 will need to wait until January 2027 to claim their full retirement benefits.

These changes will significantly affect the youngest baby boomers and Generation X, whose birth years span from 1965 to 1980. Research indicates that these groups are among the least financially prepared for retirement. The youngest boomers — born between 1959 and 1965 — are now turning 65, but many lack sufficient retirement savings. A study by the ALI Retirement Income Institute found that about one-third of younger boomers will rely on Social Security for at least 90% of their income by age 70. However, Social Security benefits are designed to replace only about 40% of a person’s pre-retirement income.

Generation X also faces a challenging retirement outlook. The average Gen X household has saved about $150,000 for retirement, a figure far below the estimated $1.5 million needed for comfortable retirement living. Alarmingly, roughly 40% of Gen Xers have no retirement savings at all, according to another study.

Maximizing Social Security Benefits

Older Americans can boost their Social Security benefits by delaying claims until age 70. Waiting until this age increases benefits by about 25% compared to claiming at FRA. Despite this significant increase, only about 4% of Americans delay claiming benefits until 70, according to a study by the Transamerica Center for Retirement Studies. By contrast, claiming benefits at 62 reduces monthly payments by approximately 30%, yet many retirees choose this option. Early claims often result from unexpected retirement due to health issues, job loss, or the preference for guaranteed income, even if it is lower.

Cost-of-Living Adjustments

Each year, Social Security adjusts benefits to keep pace with inflation, preserving beneficiaries’ purchasing power. In 2025, the annual cost-of-living adjustment (COLA) will be 2.5%, marking the smallest increase since 2021 due to moderating inflation. For most beneficiaries, the updated COLA will apply to their January 2025 payments.

Understanding these changes and planning accordingly can help ensure financial stability for Americans navigating the retirement landscape.