Future retirees will have to adapt their retirement plans to the new requirements, while the Social Security Administration will increase benefits by 2.5% for the cost of living adjustment (COLA). 2025 will bring changes for those close to retirement in the United States. The Social Security Administration (SSA) has announced adjustments to the retirement age, the penalty for early retirement and the percentage increase for postponing it beyond the full age. In addition, a 2.5% increase in benefits will be applied to maintain purchasing power against inflation.
The main people affected will be those born in 1958 and 1959 and, above all, those who will turn 62 in 2025, as they will see their benefits reduced if they decide to take their benefits before the legal age. The most relevant changes and the steps to request them are detailed below.
New requirements for retirement in 2025: workers born in 1958, 1959 and onwards
The full retirement age (FRA) in 2025 will be set at 66 years and 8 months for those born in 1958 and in the first two months of 1959. However, the big change will affect those born from 1960 onwards, who will have to wait until they are 67 to receive the full benefit.
Although it is possible to start receiving Social Security from the age of 62, doing so before full age implies a permanent monthly discount. This penalty varies according to the number of months remaining until full retirement.
How early retirement affects: permanent reductions in monthly benefits
The SSA applies a progressive cutback method to benefits. During the first 36 months of early retirement, the cut is around 0.55% per month; from the 37th month onwards, it is reduced by around 0.42% for each additional month. This means that if someone born in 1960 starts receiving their pension at the age of 62, they could suffer a permanent reduction of up to 30% of the benefit. Simplified example of retirement age and cuts:
| Year of Birth | Full Retirement Age | Approximate Reduction if Claimed at 62 |
|---|---|---|
| 1958 | 66 years and 8 months | 28.33% less of the pension |
| 1959 | 66 years and 10 months | 29.17% less of the pension |
| 1960 and later | 67 years | 30% less of the pension |
It is essential to assess the economic consequences of applying for retirement at an early age, as the cut is irreversible. If you want to calculate your retirement, enter to official web SSA.
Delaying retirement beyond the full age: a strategy to increase the pension
For each year that retirement is postponed beyond full retirement age (up to 70), the SSA offers an increase in benefits. This measure can be advantageous for those who wish to maximize their monthly payments and have sufficient income while they continue to work.
Under current provisions, these credits for postponed retirement allow an additional percentage to be added to the basic payment, which translates into more total income in the long term.
2.5% increase for COLA and Medicare requirements from the age of 65
In 2025, the SSA will apply a 2.5% adjustment to all pensions to match the rise in prices. This update will impact monthly payments and coverage credits, which may mean a small improvement for those already receiving a pension.
At the same time, we must not forget the medical benefits from the age of 65. Medicare (Parts A and B) is available to cover hospitalizations and medical consultations. In addition, those who have deceased spouses can apply for survivor benefits from the age of 60 (or from the age of 50, if they have a disability).
Compatibility with earned income and steps to apply for a pension
One of the most notable advantages is that, if you receive the Social Security pension and continue to work, the additional income does not reduce the benefit, provided that the beneficiary has reached full retirement age. To start the application:
- Verify the eligibility date: The SSA allows you to start the process up to four months before reaching the age of entitlement to retirement.
- Gather the documentation: The Social Security number, employment data and contribution records are required.
- Choose the application method: It can be done online, through the official website, or in person at the SSA offices.
- Check compatibility with other benefits: Pensioners due to widowhood, disability or with supplementary retirement plans should assess whether there are any possible incompatibilities.
Are you going to retire this year? If you want to keep up to date with more Social Security issues, don’t forget that you can continue to find out more with articles related to the economy.
