Social Security is a complex program, which has been made even more complicated for users because of its annual changes and adjustments that serve to ensure that the program can keep up with the times.
These changes are essential for beneficiaries, and knowing them can make a very big difference in their financial planning year after year, so keeping informed is key.
The most well-known change is the annual cost-of-living adjustments (COLA) that benefits receive to protect the purchasing power of beneficiaries, but there are other changes that affect workers and retirees that are not as obvious or as talked about as the 2.5% COLA that will be applied to benefits in 2025
Social Security’s Full Retirement Age (FRA) Is Increasing In 2025
The earliest retirement age is 62 years old, but those who choose to retire at that age will not receive their primary insurance amount (PIA), which is another term for baseline benefit. The age at which a worker will be able to receive the PIA will be their full retirement age, which is determined by the year a worker was born.
A worker’s retirement age has been changing for years. The original full retirement age was 64, which was established when the program was created in 1935, but when the 1980s brought a Social Security crisis, one of the preventative measures to avoid another collapse was to increase the retirement age to 67 years old.
This process took time and was implemented slowly, which meant gradually increasing the age until those who were born after 1960 will be able to retire at age 67 with full benefits.
Of course, workers can still choose to retire early at age 62, but that will mean a 30% reduction in their benefits, taken from what their PIA should have been had they reached the full retirement age.
To get the most amount of benefits possible, a worker must have paid payroll taxes tot the Social Security Administration for 35 years and retire after turning their full retirement age. Only that will guarantee them 100% of their PIA.
But there is an additional amount that some workers can get, which is even higher than the PIA, and that is if a worker chooses to retire at age 70, which is the age at which the maximum amount in benefits can be awarded, 8% every year after full retirement age for a total of 24% for those who will retire at age 67.
Social Security’s Maximum Retired-Worker Benefit Is Increasing In 2025
Social Security benefits are capped. The program is not infinitely scalable, so there is a maximum number of benefits that a former worker can receive. This cap grows every year along with the COLA, again ensuring that benefits keep up with inflation.
To get the maximum Social Security benefit, a worker will have to work for 35 years for the maximum amount of taxable income or more and wait until age 70 to claim.
These conditions are not easy to meet for most workers so it is important to see the difference between maximum amounts of benefits at the different popular claiming ages to know why it is worth it to wait as long as possible to claim. Since the conditions are so hard to meet, only about 7% of workers satisfy the requirement in any given year.
