Ramsey Solutions’ Jade Warshaw reveals how to get the most out of your Social Security check and more in “The Bottom Line.”
social security”full retirement age” is expected to increase next year, meaning those nearing retirement will have to wait a little longer before they can claim a bigger benefit.
The full retirement age (FRA) for Social Security was 65 when the program was created in the 1930s, but reforms made in 1983 gradually increased the FRA from age 65 to 67 in two-month increments over a period of 22 years, which began for those who turned 62 in 2000.
Next year, the FRA will rise to 66 years and 10 months for people born in 1959. They will begin to qualify for their full Social Security benefits from November 2025.
Retirees can start collecting theirs Social security benefits before they reach FRA, the minimum age for this being 62 years. However, retirees who claim early will have their monthly benefit permanently reduced by up to 30% depending on how early they claim.
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The full Social Security retirement age will rise to 66 years and 10 months in 2025. (Kevin Deitch/Getty Images)
Americans can also delay claiming 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 to receive the maximum benefit.
The FRA increase, coming in 2025, is the penultimate age change that will occur within Social security reform a law that was passed in 1983, although this may change with future reforms.
The latest change would apply to workers born in or after 1960 and require those workers to wait until they turn 67 to receive FRA, meaning a worker born in 1960 would have to wait , to claim benefits until he reaches his birth month in 2027. to get their full benefits.
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Social Security’s finances are strained by America’s aging population. (iStock)
Social security recipients are also on track to receive a 2.5 percent cost-of-living adjustment (COLA) to their benefits next year to account for inflation. COLA increases benefits to account for rising commodity prices in the economy so that retirees do not see their purchasing power decrease over time.
The 2.5% COLA is the lowest since 2021. and it comes as inflation in the US economy has eased over the past two years, after reaching a four-decade high in 2022, even as prices remain high and strain household budgets.
The new COLA will go into effect for most Social Security recipients when they receive their January distributions.
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Social Security beneficiaries should receive a 2.5% COLA for 2025. (William Thomas Kane/Getty Images)
Social Security benefits are largely financed through payroll tax receipts, although it relies in part on a trust fund to pay benefits not covered by incoming tax revenue.
A declining ratio of workers to retirees caused by an aging US population and the retirement of members of the Baby Boomer generation has strained the program’s finances, which are teetering on insolvency.
Social Security’s main trust fund, the Old Age and Survivors Insurance Trust Fund, is expected to be depleted in 2033, bringing the total to 21% reduction of benefitsaccording to the nonpartisan Commission for a Responsible Federal Budget (CRFB).
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That would amount to a reduction in the nominal benefit of $16,500 for a typical dual-earner couple who retires at the time the trust fund is depleted, or a reduction of $12,400 for a typical single-earner couple, according to the CRFB.
* This story was originally published on 12/18/24.
2024-12-25 17:00:14
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