There is going to be a significant change here, which will affect the retirement plans of millions of American citizens. Social Security rules are going to change in 2025, which will determine when a person can retire with 100% benefits.
New Retirement Age Change
The Social Security Administration (SSA) has confirmed that people born before 1960 can still retire with a full pension at the age of 66 years and 10 months.
But for people born in 1960 or later, this age has been increased to 67 years, which means they will have to wait longer to receive their full benefits.
This change has left many people wondering whether they should retire early and accept a lower pension or retire late and receive a higher monthly payment?
Let’s understand in detail.
What should be your age to receive a full pension?
Your Full Retirement Age (FRA) depends on your birth year:
| Birth Year | Full Retirement Age (FRA) |
|---|---|
| 1955 | 66 years and 2 months |
| 1956 | 66 years and 4 months |
| 1957 | 66 years and 6 months |
| 1958 | 66 years and 8 months |
| 1959 | 66 years and 10 months |
| 1960 or later | 67 years |
If you retire at age 62, your monthly pension could be permanently reduced by up to 30%.
Conversely, if you wait until age 70, your pension will grow by 8% each year, giving you a higher payout.
Example:
- John, born in February 1959, has a full retirement age of 66 years and 10 months.
- If he retires at age 62, he will receive a lower monthly payout for life.
- But if they wait until 70, their monthly pension will be about 30% higher.
Is it worth retiring early?
Many people want to take advantage of their pension by retiring early, but this decision depends entirely on the individual financial situation.
Disadvantages of retiring early
- The amount you receive each month will be reduced (reduced by about 0.55% per month).
- The total payout may be less in the long run if you are older and live longer.
Advantages of retiring late
- You can get up to 8% more pension each year (up to age 70).
- If you have a longer lifespan, you will receive more money overall.
Best States for Retirees
Where you live can also affect your Social Security benefit. Some states do not tax Social Security, allowing you to keep your monthly income higher.
Best tax-free states
| State | Retirement Tax Benefits |
|---|---|
| Illinois | No state tax on pensions, 401(k), or Social Security. |
| Iowa | Residents 55+ are exempt from 401(k), IRA, and Social Security taxes. |
| Mississippi | No state tax on retirement income. |
| Pennsylvania | Pensions, 401(k), and Social Security benefits are tax-free. |
If you live in these states, the entire amount of your Social Security will be tax-free.
How to boost your pension?
Planning for retirement is important. Experts believe that by taking certain steps you can get the most out of your pension:
- Wait until age 70 – you will get the highest monthly payout and a spousal benefit too.
- Avoid claiming at 62 – taking a pension early can result in a reduction of up to 30%.
- Create other income sources – If you have investments, pensions or savings plans, they can make your retirement more comfortable.
Stephanie McCullough, an expert at Sophia Financial, says:
“If you can keep your monthly expenses low, your financial situation will be more stable and you will have more freedom.”
Other Changes in Social Security in 2025
| Change | 2025 Adjustment |
|---|---|
| Cost-of-Living Adjustment (COLA) | 2.5% increase (lower than 3.2% in 2024). |
| Maximum Taxable Earnings | Increase from $168,600 to $176,100. |
| Earnings Test | Threshold before benefits are reduced: $23,400 (below FRA), $62,160 (above FRA). |
| Social Security Office Changes | Appointment-only model for in-person visits. |
Conclusion: Make your decision wisely
Social Security rules are changing, so don’t rush into retirement decisions.
If you retire early, you will get less pension, but if you retire late, you will get more benefits.
Make a decision keeping in mind your financial goals, health and lifestyle.
Important questions (FAQs)
What will be the new age for full retirement in 2025?
The full retirement age will be 67 years for people born in 1960 or later.
How much will I lose if I retire at 62?
Your pension will be permanently reduced by 30%.
Will you get more money if you retire late?
Yes, your pension will increase by 8% each year if you wait until age 70.
Which states are the best where Social Security is not taxed?
Social Security is not taxed in Illinois, Iowa, Mississippi, and Pennsylvania.
What other changes will happen to Social Security in 2025?
The COLA will increase by 2.5%, the taxable income cap will increase, and Social Security offices will be available by appointment only.