Deciding when to start drawing Social Security is one of the most important financial decisions retirees faces, especially in 2025, as several policy shifts and economic factors are reshaping the landscape.
At a glance:
- Individuals can start drawing social security as early as 62, but drawing early will affect their monthly payout.
- Others may choose to delay taking social security until age 70 in order to get a percentage rate increase.
- Most will wait until their full retirement age (FRA), which in the past has been age 65, but has been updated in 2025.
Major Updates to Social Security in 2025
While it should be part of your conversation with your financial advisor on whether to do an early retirement, social security has remained fairly constant over decades; however, there are some major changes that retirees need to be made aware of. Here are three key points to consider:
Full retirement age officially rises to age 67 in 2025.
While the age for Medicare eligibility remains at 65, individuals born in 1960 or later must wait until age 67 to receive full social security retirement benefits. Individuals can still claim benefits as early as age 62, however this may result in a permanent reduction of up to 30% in monthly payments. On the other hand, delaying benefits from the past 67 years old can increase an individual’s monthly payout approximately 8% per year, up to the age of 70.
There has been an 2.5% Cost-of-Living Adjustment (COLA) in 2025.
To help with inflation, the Social Security Administration implemented a 2.5% COLA for 2025. This adjustment potentially increases the average monthly benefit from $1,927 to $1,976. In addition, the maximum taxable earnings cap has risen to $176,100.
The SSA has implemented enhanced identity verification measures.
Effective April 14, 2025, the SSA has strengthened identity verification procedures to enhance security.
- In-Person Verification: Required for individuals unable to use their personal “My Social Security” account when applying for Retirement, Survivors, or Auxiliary (Spouse or Child) benefits.
- Telephone Applications: This is only permitted for those applying for Disability Insurance, Medicare, or SSI benefits, without the need for in-person verification.
These measures aim to protect beneficiaries from identity theft and fraud.
Top Five Factors to Consider When Deciding When to Start Drawing Social Security
Timing your Social Security benefits is more than just a retirement milestone—it’s a powerful tax planning decision, especially for high-income retirees. Here’s what to consider:
1. Taxability of Benefits
Up to 85% of your Social Security benefits can be taxable if your combined income exceeds IRS thresholds. For individuals, that threshold is $34,000; for couples, $44,000. Many high earners cross this easily. Smart withdrawals from tax-deferred accounts (like traditional IRAs) can push more of your benefits into the taxable column.
2. Reducing Required Minimum Distributions (RMDs)
Delaying Social Security to age 70 while tapping tax-deferred accounts early can lower future RMDs and reduce your taxable income later. This “bridge strategy” can help flatten your lifetime tax curve and keep Medicare premiums (IRMAA surcharges) in check.
3. Strategic Roth Conversions
Post-retirement, pre-Social Security years are ideal for Roth conversions at lower tax brackets. Drawing Social Security early could reduce this window, making conversions less efficient and potentially bumping you into a higher bracket.
4. Capital Gains and Investment Income
Delaying benefits may reduce your adjusted gross income (AGI), helping you manage capital gains taxes or avoid the 3.8% Net Investment Income Tax.
5. Life Expectancy
If you need immediate income or have health concerns, social security benefits can help buffer the stress while also being on Medicare. Meanwhile, if you have a family history of longevity and expect to live well into your 80s or 90s, delaying benefits can be the better choice.
Choosing when to start drawing Social Security benefits involves balancing immediate financial needs against long-term income security. With the FRA now at 67 and new administrative requirements in place, it’s more important than ever to plan carefully. Consulting with a financial advisor and being informed about policy changes can help ensure that you make the best decision for your individual circumstances.
