A major Social Security change is coming in 2025, affecting when millions of Americans can retire with full benefits. The Social Security Administration (SSA) has confirmed that only individuals born before 1960 can still retire at 66 years and 10 months with 100% of their benefits.
For those born in 1960 or later, the full retirement age (FRA) increases to 67, meaning they will have to wait longer to claim their full Social Security benefits.
This change has many nearing retirement reconsidering their plans. Should you retire early and accept reduced benefits, or delay retirement for a higher monthly payout? Here’s everything you need to know.
Table of Contents
FRA Change
Your full retirement age depends on your birth year:
| Birth Year | Full Retirement Age (FRA) |
|---|---|
| 1959 or earlier | 66 years, 10 months |
| 1960 or later | 67 years |
If you choose to retire early at 62, your benefits will be permanently reduced by up to 30%, significantly impacting financial stability in retirement. On the other hand, delaying beyond FRA can result in an 8% increase per year in benefits, up until age 70.
Example
- John, born in February 1959, has an FRA of 66 years and 10 months.
- If he retires at 62, his monthly Social Security checks will be much smaller for life.
- If he waits until 70, he could receive up to 30% more each month.
Retire Early
Early retirement sounds appealing, but it comes with a cost. Here’s what you need to consider:
- Retiring before FRA reduces benefits by 0.55% per month for the first three years.
- Beyond that period, the reduction increases to 0.42% per month.
- A 1960-born retiree who claims benefits at 62 will lose 30% of their benefits permanently.
Some retirees prefer early retirement to enjoy more freedom, while others work longer to increase their monthly payments. Factors like financial stability and personal health play a crucial role in this decision.
Best States for Retirees
Where you live in retirement can affect how much of your Social Security income you keep. Some states offer tax advantages, helping retirees stretch their benefits further:
| State | Retirement Tax Benefits |
|---|---|
| Illinois | No state tax on pensions, 401(k), or Social Security. |
| Iowa | Residents 55+ are exempt from 401(k), IRA, and Social Security taxes. |
| Mississippi | No state tax on retirement income. |
| Pennsylvania | Pensions, 401(k), and Social Security benefits are tax-free. |
How to Maximize
Planning ahead is crucial to securing a financially stable retirement. Here’s what experts suggest before claiming benefits:
- Waiting until 70: Ensures the highest possible monthly payments and better survivor benefits for a spouse.
- Claiming at 62: Provides an early financial cushion but comes with permanently reduced payments.
- Having additional income sources: Pensions, investments, and savings can supplement Social Security benefits.
Stephanie McCullough, a financial expert at Sofia Financial, advises keeping fixed expenses low to maintain financial flexibility. “If you keep your cost of living manageable, you’ll have more discretionary income and financial stability,” she explains.
Other Changes
Aside from the FRA increase, the Social Security Administration is making other important adjustments in 2025:
| Change | 2025 Adjustment |
|---|---|
| Cost-of-Living Adjustment (COLA) | 2.5% increase (lower than 3.2% in 2024). |
| Maximum Taxable Earnings | Increase from $168,600 to $176,100. |
| Earnings Test | Threshold before benefits are reduced: $23,400 (below FRA), $62,160 (above FRA). |
| Social Security Office Changes | Appointment-only model for in-person visits. |
With Social Security eligibility rules changing, it’s more important than ever to plan ahead. Whether you choose to retire early or delay benefits, knowing these changes will help you make informed financial decisions.
Key Takeaway
Don’t rush into claiming Social Security without considering the financial impact. Strategic planning can maximize your retirement income and ensure long-term financial security.
FAQs
What is the new full retirement age in 2025?
For those born in 1960 or later, full retirement age (FRA) is now 67.
How much are Social Security benefits reduced if I retire early?
Retiring at 62 results in a permanent 30% reduction in benefits.
Does delaying Social Security increase my payments?
Yes, delaying benefits beyond FRA increases payments by 8% per year.
Which states are best for retirees tax-wise?
Illinois, Iowa, Mississippi, and Pennsylvania offer tax-free Social Security.
What other Social Security changes are happening in 2025?
COLA increases 2.5%, taxable income cap rises, and offices go appointment-only.
