Major changes to the Social Security Retirement System are planned for 2025. This change focuses on the Full Retirement Age (FRA), which the Social Security Administration (SSA) uses to determine when an individual can begin receiving full retirement benefits. You can enjoy the benefits without any reduction. Currently, FRA varies between ages 66 and 67 depending on the beneficiary’s year of birth. However, starting in 2025, the FRA for those born in 1959 will be set at 66 years and 10 months, making this the last year in which the FRA will fall below 67 years.
If you were born in 1958 and turn 66 in 2024, your FRA would be 66 years and 8 months. People born in 1959 who will turn 66 in 2025 will need to wait until they are 66 years and 10 months old to receive their full benefit. In 2026, the FRA for people born after 1960 will be 67, and the standard age for this group to receive full benefits will be 67.
Current system of retirement benefits
You can start collecting Social Security retirement benefits at age 62, but the amount will be less than if you wait until you reach your FRA. In contrast, delaying benefits beyond FRA until age 70 will significantly increase your monthly payments. This enhanced benefit increases by approximately 8% each year, allowing individuals who defer until age 70 to maximize their monthly benefits. Conversely, if you start benefits earlier than FRA, you’ll receive a small reduction for each month your benefits are received early.
To understand the difference, consider that if a person is eligible to receive $1,000 per month at full retirement age, they will receive less if they choose to start benefits earlier. The exact reduction amounts vary, and the SSA provides a table detailing the reduction amounts based on various years of birth. This can help individuals understand how much of a reduction they could face if they decide to start collecting benefits at age 62 without waiting until FRA. Please note that you must be at least 62 years old for the entire month to qualify for benefits for that month, and the reduction percentage calculated is an approximation due to rounding.
The maximum amount of retirement benefits a person can receive also depends on the age at which they choose to retire. For example, if you retire in 2024 with an FRA of 66 years and 8 months, your maximum benefit will be $3,822 per month. However, if you decide to retire early at age 62, the maximum benefit you can receive will be reduced to $2,710. If you delay retirement until age 70, your monthly benefits will increase significantly, reaching up to $4,873. These fluctuations indicate that the timing of retirement has a significant impact on the benefits you can expect.
For married couples, the rules are slightly different. The spouse of a retiree can receive up to 50% of the benefits the primary worker would receive at full retirement age. However, this maximum spousal benefit is automatically reduced by 50%, and further reduced if received before your spouse’s full retirement age. This makes it important for spouses to plan to ensure they are optimizing their combined benefits.
Choosing to start collecting benefits before reaching FRA has both advantages and disadvantages. The main benefit is that retirees can start receiving benefits sooner, providing financial support for a longer period of time in retirement. The downside is that those who start benefits early will have their monthly payments permanently reduced. The right decision depends heavily on your individual circumstances, including your health, financial needs, and retirement goals, so it’s essential to carefully evaluate these options.
If you delay your retirement benefits until after FRA, there are clear financial benefits to delaying your retirement benefits. These credits increase your monthly benefits each time your benefits are deferred until age 70. So, for those who can afford to wait longer, delaying benefits could significantly increase your retirement income. However, other factors such as life expectancy, personal health, and financial obligations should also be considered when determining the best time to start receiving benefits.
