Social Security Changes 2025

Social security is very important in our lives. Our income does keep us going, but what if at some point our needs grow bigger? And that’s about when we retire? For most people, social security plays a great role in retirement planning. So, staying updated is important.

The Social Security Administration (SSA) has made some changes to benefits recently. These will be launched in 2025. Some of the changes have been made in the annual Cost of Living Adjustment (COLA). Here are some of the key changes you must take note of when it comes to the latest updates about social security.

5 changes to Social Security in 2025

Millions of people depend on the benefit programs of SSA. So, yearly changes to these programs and its payouts should keep on are very important news.

This year, the cost-of-living adjustment (COLA) is less than 2024. Still, any extra income is welcome for beneficiaries getting fixed incomes. These are the 5 changes that you should take note of in the social security programs to be put in effect from 2025 –

Cost of living adjustment (COLA) rise

The SSA has made an announcement about COLA. Benefit checks will rise 2.5 percent in 2025. This adjustment of 2.5 percent will amount to an average increase of $50 in the monthly benefits that the retired workers will get. This will start in January 2025.

Particularly, the average check for retired workers will rise from $1,927 to $1,976. If you and your partners both receive benefits from social security programs, the estimated payment will rise from $3,014 to $3,089.

The SSA is linking adjustments to COLA to the Consumer Price Index. This is for the people getting wages from urban areas and clerical workers, since 1975. It compares the third-quarter CPI-W of the previous year to that of the present year to get the COLA. Then it is adjusted by taking note of the change in CPI-W from one year to the next in a percentage.

Maximum taxable earnings go up

In the year 2024, the maximum income subject to social security taxes was $168,600. This means that the workers who were giving money into the system are taxed on their earnings up till this amount. This is typically at the 6.2 percent rate. In 2025, the maximum earnings will go up to $176,100. This means that an even bigger amount of income will be subject to the tax. This adjustment has been made because wages in the US have increased recently.

Maximum social security benefit set to rise

Other than maximum taxable earnings, there will also be a rise in the maximum social security benefit. For a worker who is retiring at the full retirement age, the maximum social security benefit will rise from $3,822 in 2024 to $4,018 in 2025. This maximum can be applied only to those who will be retiring at the full retirement age. This means that the people qualifying for this have to be 67 for anyone who was born after 1960.

On the other hand, the maximum benefit will be less for the people who are retiring before they have reached the full retirement age. This is because the benefits will be reduced in such cases. So, if those planning to retire beforehand can delay their retirement until they reach the full retirement age, they can make the best of their social security benefits.

Increase in average benefits for spouses and disabled workers

For spouses of deceased persons and disabled workers, there will be an increase in average social security benefits from 2025. The benefit will increase across the board. These benefits can be applied to people such as widows, widowers, and the disabled. Let us see how these figures can break out –

• According to the SSA, the average widowed mother with two children can see a rise from $3,669 to $3,761 in their social security benefits from the year 2025.
• For the widows and widowers who are aged and living by themselves, social security benefits will increase from $1,788 to $1,832.
• In the case of workers who are disabled with a spouse and one or more children, the social security benefits will rise from $2,757 to $2,826.

Please note that the given numbers are obviously averages we are offering. The individual situations of each person regarding social security benefits can differ. They will depend on more specific parameters than the general ones we have mentioned here.

Income test exempt amounts adjusted

If you are already getting social security benefits before reaching full retirement age, your benefits can go down. This will happen only if your income is beyond certain limits. This is the retirement earnings test. It can claim a big chunk of your benefits if you are still working. In 2025, exempt amounts from this test are –

• $1,950 per month ($23,400 per year) in 2025 if you start collecting your social security before full retirement age, in 2025. This will be before the SSA starts to take away the benefits at the rate of $1 in benefits for every $2 beyond the limit. In 2024, the maximum exempt amount from income was $1,860 per month ($22,320 per year).
• In the year that you reach your age for full retirement, this rule still holds. But it will be up to the month when you are reaching the age for full retirement. In 2025, you can get up to $5,180 per month ($62,160 per year). After that, your benefits are taken away, at the rate of $1 in benefits for every $3 that you have earned above the limit (instead of every $2). In 2024, the threshold for this was $4,960 per month ($59,520 per year).

The Bottom Line

The 2025 Social Security COLA gives workers and retirees a good increase in benefits. But this is not the only change. Other levels and limits have also been adjusted. This is in keeping with the ongoing increase in costs.