Social Security is undergoing significant changes. The last stage of the Social Security changes takes effect starting this month. For those born in 1959, the full retirement age (FRA) is now 66 years and 10 months, which is ten months later than the previous FRA of 66 and two months later than the 1958 group.
More than 40 years ago, Congress linked the FRA to trends in life expectancy. Since 1955, FRA has been increased by two months for every birth group. The final group under 67 years of age was in 1959. Those born after 1960 will be subject to a 67-year FRA.
Workers in this group begin to reach 66 years, 10 months from March 2025 through January 2026.
The penalty cut is harsher for the 1959 generation than for those who retired when FRA was 66. About 29.17 per cent of the primary insurance payout. However, workers can still file for social security benefits as early as 62.
Delays in seeking social security benefits give people delayed retirement credits of 8% annually (two-thirds of 1% monthly) until they reach 70.
- 2025 Dollar Benchmarks
Maximum monthly benefit
$2,831 if claimed at 62 years
$4,018 at FRA
$5,108 at age 70 years - Earnings test limits
Under FRA: $23,400 a year; benefits are cut by $1 for every $2 earned above the cap.
Year you hit FRA: $62,160 until the birth-month; beyond that, there’s no limit.
These numbers argue for working for a longer time. Every year of delay after FRA not only captures the 8 per cent credit but also adds an inflation-adjusted COLA to a higher base.
3 changes coming for Social Security in 2025: COLA is projected at 2.57% however will likely be reduced a bit. Full Retirement age increases to 66 years and 10 months with 67 being the full retirement age in 2026. The maximum wages subject to social security tax will increase. pic.twitter.com/YzWfGrn9hL
— Baldwin CPAs, PLLC (@baldwincpas) September 20, 2024
However, it is not possible for everyone to keep working till 70. This will reduce their benefits even if they have given a substantial amount to the Social Security Administration.
Based on this new guideline, recipients need to plan their retirement better. Here are a few pointers they can take.
Calculate the break-even point. Compare the lifetime value of an earlier, smaller social security check with a later, greater check. Calculate the health and employment prospects permit.
Be mindful of the income test. Benefits may be temporarily withheld if you cross the $23,400 or $62,160 threshold. If you wait until the month you achieve FRA, the penalty is completely avoided.
Do not forget Medicare. Social Security and Medicare applications are now processed separately. You must enrol in Parts A and B during your original enrollment window in order to avoid late-sign-up fines. This is applicable even if you postpone benefits over the age of 65.
Create a buffer. By 2035, the Trust Fund will only cover roughly 83 per cent of scheduled benefits. Hedging that risk is made easier by adding IRAS, 401(k)s, or HSAS to Social Security.
Thinking about retirement? Social Security’s full retirement age is going up to 66 years and 10 months in 2025. The full retirement age changes based on life expectancy. Read more: https://t.co/OzoPx4O5rZ #retirement #SocialSecurity pic.twitter.com/B6SjVw3q7F
— Ren Cicalese III CPA (@R3CPA) December 18, 2024
May 2025 is a significant date for the first generation of 1959 babies. It is when “full retirement” officially becomes 66 years and 10 months. Waiting until age 70 can result in monthly deposits exceeding $5,000, while claiming early locks in a benefit to almost 30%. The message is clear: understand the new era, do the math, and then create a strategy. If calculated properly, it will last through multiple election cycles. Add earnings-test traps and impending solvency issues.
Today’s homework could earn you thousands of dollars more annually for the rest of your life.
