Social Security’s “full retirement age” is set to be raised next year, meaning those nearing retirement will have to wait a while before they can claim a higher pension.

When the program was created in the 1930s, the full retirement age (FRA) for Social Security was 65. However, reforms in 1983 gradually increased the FRA in two-month increments from age 65 to 67 over a 22-year period beginning for that age group, which turned 62 in 2000.

Next year, the FRA will increase to 66 years and 10 months for people born in 1959. From November 2025 they would be entitled to full social security benefits.

Retirees can begin receiving their Social Security benefits before they reach FRA. The minimum age for this is 62 years. However, retirees who claim early will see their monthly benefits permanently reduced by up to 30%, depending on how early they claim.

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

The 2025 FRA increase is the penultimate age change that will occur under the Social Security Reform Act passed in 1983, although this could change with future reforms.

The latest change applies to workers born in 1960 or later and requires those workers to wait until they are 67 to reach FRA. This means that a worker born in 1960 would have to wait until they reach their birth month in 2027 to receive their full benefit.

Social Security Crisis: Beneficiaries Face 21% Benefit Cuts Without Reforms, CRFB Says

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. The COLA increases benefits to reflect rising commodity prices in the economy so that retirees do not experience a decline in their purchasing power over time.

The 2.5% COLA is the lowest since 2021 and comes as inflation in the U.S. economy has eased over the past two years after reaching its highest level in four decades in 2022, although prices continue to rise are high and put a strain on household budgets.

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

The Social Security cost of living adjustment will be 2.5% in 2025, less than last year

Social Security benefits are funded largely by payroll tax revenues, although they rely in part on a trust fund that pays benefits not covered by incoming tax revenues.

The declining worker-to-retiree ratio caused by the aging of the U.S. population and the retirement of members of the baby boomer generation has strained the program’s finances, which are trending toward insolvency.

According to the bipartisan Committee for a Responsible Federal Budget (CRFB), Social Security’s main trust fund, the Old-Age and Survivors Insurance Trust Fund, is expected to be depleted in 2033, which would result in a 21% across-the-board benefit reduction).

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According to CRFB, this would equate to a nominal benefit reduction of $16,500 for a typical dual-income couple retiring at the time the trust fund was exhausted, or a $12,400 reduction for a typical single-income couple.

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