Retirement planning faces a key change in 2025: the gradual increase of the Social Security full retirement age (FRA). This change, part of a reform introduced in 1983, responds to increases in life expectancy and seeks to maintain the sustainability of the system.
The FRA is the point at which workers can claim their full Social Security benefits, determined by their work history and income levels. Although historically it was set at 65 years, it has been gradually increasing.
Changes in full retirement age over the years and in the future
For example, people born in 1957 reached their FRA at age 66 years and 6 months, while those born in 1958 need to be 66 years and 8 months. In 2025, this threshold will rise again to 66 years and 10 months for those born in 1959, marking the penultimate adjustment before the FRA reaches 67 years for those born in 1960 or later. This latest change will take effect in 2027.
Although the FRA defines when full benefits can be claimed, the system allows for considerable flexibility. Workers can begin receiving payments at age 62, although with a permanent reduction in the monthly amount.
For example, those who choose this route will see their payments reduced by 30%, which can be a strategic decision for those who need immediate income or prioritize more years of guaranteed income.
In contrast to the above, delaying filing until age 70 offers a significant reward: an increase of approximately 25% in monthly benefits. However, data from the Transamerica Center for Retirement Studies shows that only 4% of beneficiaries wait until that age to maximize their benefits.
According to the ALI Retirement Income Institute, about 33% of younger baby boomers will depend almost exclusively on Social Security for support at age 70, while it was designed to replace only 40% of earned income.
On the other hand, Generation An additional study revealed that 40% of this generation has not started saving for retirement, which could increase their dependence on Social Security.
