of Social Security”full retirement age” will increase next year, meaning those approaching retirement will have to wait a little longer before they can claim a bigger benefit.

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

Next year, the FRA will increase to 66 years and 10 months for people born in 1959. Starting in November 2025, they would begin receiving full Social Security benefits.

Retirees can start collecting theirs Social Security benefits before reaching the FRA, the minimum age to do so is 62. However, for retirees who apply in advance, the monthly allowance will be permanently reduced by up to 30% depending on the advance of the application.

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The full Social Security retirement age will increase to 66 years and 10 months in 2025. (Kevin Dietsch/Getty Images)

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

The FRA increase in 2025 is the penultimate age change to occur under the Social Security Reform law that was enacted in 1983, although it could change with future reforms.

The final change will apply to workers born after 1960 and will require those workers to wait until age 67 to reach the FRA, meaning that a worker born in 1960 would have to wait to collect the benefits until they reach their birth month in 2027. to get their full benefits.

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Social Security’s finances have been strained by America’s aging population. (iStock)

Social Security recipients are also on track to receive a 2.5% cost-of-living adjustment (COLA) on their benefits next year to account for inflation. COLA increases benefits to account for rising prices of goods in the economy so that retirees do not see their purchasing power diminish over time.

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

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

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Social Security beneficiaries must receive a COLA of 2.5% by 2025. (William Thomas Cain/Getty Images)

Social Security benefits are largely financed through payroll tax receipts, although it relies in part on a trust fund to pay benefits that are not covered by tax receipts.

The decline in the ratio of workers to retirees caused by America’s aging population and retirements among members of the baby boomer generation has strained the program’s finances, which are prone to insolvency.

Social Security’s main trust fund, the Old Age and Survivors Insurance Trust Fund, is projected to run out in 2033, leading to an overall 21% drawdown. profit cutaccording to the nonpartisan Committee for a Responsible Federal Budget (CRFB).

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That would mean a nominal benefit reduction of $16,500 for a typical dual-earner couple who retired at the time the trust fund was depleted, or a reduction of $12,400 for a typical single-earner couple, according to CRFB.

*This story was originally published on 12/18/24.