Establishing a solid retirement income plan is essential, whether you’re already retired or planning for retirement soon. Social Security benefits often play a significant role in retirement planning, so staying informed about any changes to the program is crucial. Starting in 2025, the Social Security Administration (SSA) has announced several important updates, including a cost-of-living adjustment (COLA) and changes to benefits. Here’s what you need to know about the upcoming changes to Social Security.
2025 Social Security Changes Following COLA Increase
With around 72.5 million beneficiaries relying on Social Security, the annual modifications to the program, particularly the cost-of-living adjustment, are closely watched. For 2025, the COLA is set at 2.5%, slightly lower than the previous year’s 3.2% increase. Although modest, this adjustment is still welcomed by many who depend on fixed incomes. Here’s a breakdown of how the 2025 COLA will impact Social Security checks and other benefits.
Beneficiaries Will See a 2.5% Increase in Social Security Checks
Starting in January 2025, Social Security recipients will see a 2.5% increase in their monthly payments. For the average retired worker, this means a monthly check increase from $1,927 to $1,976—an extra $50 each month. For couples where both partners receive benefits, the average payment will rise from $3,014 to $3,089.
This adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which the SSA uses to calculate COLA. The SSA compares the CPI-W from the third quarter of one year to the third quarter of the previous year to determine the percentage change, which is then applied as a COLA adjustment.
Increase in Maximum Taxable Earnings for Workers
For workers contributing to Social Security, the maximum taxable earnings limit will increase from $168,600 in 2024 to $176,100 in 2025. This means that a higher portion of wages will be subject to Social Security taxes, which are typically 6.2%. This change reflects the general rise in average wages across the U.S.
Maximum Social Security Benefits Will Rise
For those retiring at full retirement age, the maximum Social Security benefit will also see an increase. In 2025, the maximum monthly benefit will rise from $3,822 in 2024 to $4,018. This applies to individuals retiring at the full retirement age, which is 67 for anyone born after 1960. However, if you retire earlier than the full retirement age, your benefits will be reduced, and if you delay retirement beyond this age, you can receive even higher payments.
Average Benefits Increase for Spouses, Widows, and Disabled Workers
Beneficiaries across various categories will also see increases in 2025. Here are some key adjustments:
- Widows with two children: Payments will increase from $3,669 to $3,761.
- Aged widows and widowers living alone: Benefits will rise from $1,788 to $1,832.
- Disabled workers with a spouse and children: The average payment will increase from $2,757 to $2,826.
These changes reflect efforts to ensure that Social Security payments keep up with inflation and the cost of living, providing greater financial stability for beneficiaries.
Adjustments to the Retirement Earnings Test
The retirement earnings test applies to individuals who begin receiving Social Security benefits before reaching their full retirement age and continue working. If your earnings exceed certain thresholds, the SSA can withhold part of your benefits. However, the earnings thresholds will increase in 2025.
- Before full retirement age: In 2025, individuals can earn up to $1,950 per month ($23,400 annually) without any reduction in benefits. For every $2 earned above this limit, $1 in benefits will be withheld.
- Full retirement age: Once you reach full retirement age, the earnings threshold is higher. In 2025, you can earn up to $5,180 per month ($62,160 annually) before the SSA withholds benefits, with $1 withheld for every $3 earned above the limit. This is an increase from $4,960 per month ($59,520 annually) in 2024.
These adjustments make it easier for individuals who are still working to retain more of their Social Security benefits.
The 2025 updates to Social Security are designed to reflect changes in inflation and wages, providing beneficiaries with slightly higher payments across the board.
From COLA adjustments to increases in taxable earnings and benefit limits, these changes are important to understand for those who are receiving or will soon receive Social Security benefits. Staying informed on these developments helps ensure that your retirement income plan remains on track.
