As 2025 approaches, important changes are coming to Social Security that could affect your benefits. While some changes are good news, others might come as a surprise. It’s important to stay informed so you’re ready when the new year arrives.
1. A Higher Maximum Taxable Earnings Limit
Every year, there’s a limit on how much of your income is subject to Social Security taxes. In 2024, that limit was set at $168,600, meaning that any income above this amount wasn’t taxed for Social Security. But in 2025, that number will increase to $176,100.
What does this mean for you? If your income is over this new limit, you’ll pay Social Security taxes on more of your earnings. For example, if you make $7,500 more than the 2024 limit, you’ll owe an additional $930 in taxes. This change will only affect a small number of workers, as most already pay taxes on all of their income.
2. A Smaller COLA (Cost-of-Living Adjustment)
The Cost-of-Living Adjustment (COLA) is a yearly increase in Social Security benefits to help keep up with inflation. For 2025, this increase is set at 2.5%.
While this is good news, it’s not as high as some people expected. The average retirement benefit paid by the Social Security Administration (SSA) is $1,907 per month, which means this increase will add just under $50 to your monthly payment.
But, there’s a downside to this small COLA. A $10 increase in Medicare Part B premiums will eat into that extra money, leaving you with less to cover rising living costs.
3. Higher Earnings Test Limits for Retirees
Did you know that you can still work and collect Social Security benefits? However, if you earn too much, your benefits might be reduced. This is known as the earnings test.
In 2025, the earnings limit for people under full retirement age (FRA) will rise from $22,320 to $23,400. If you earn more than this, your benefits will be reduced by $1 for every $2 over the limit.
For people reaching FRA in 2025, the earnings limit will increase from $59,520 to $62,160, and benefits will be reduced by $1 for every $3 over the limit.
But don’t worry, these reductions are not permanent. Once you reach FRA, your benefits will be recalculated, and any reductions will be made in future payments.
4. Maximum Social Security Benefits Set to Increase
The maximum Social Security payment you can receive depends on two things: how many years you’ve worked and how much you’ve earned during those years. If you work for at least 35 years and earn the maximum taxable income each year, you can get the highest possible benefit.
In 2025, the maximum benefit will increase from $4,873 per month to $5,108 per month. If you choose to retire at full retirement age (FRA), your maximum benefit will also rise from $3,822 in 2024 to $4,018 in 2025.
The longer you wait to retire, the more your benefits will increase. For each year you delay collecting Social Security benefits after your full retirement age, your monthly payment will increase by 8%.
Final Thoughts
The changes to Social Security in 2025 are a mix of both good and bad news. While the higher earnings test limits and COLA increase offer some relief, the higher taxable earnings limit and rising Medicare premiums may offset these gains for many.
It’s important to stay informed about these changes so you can make decisions that work best for your financial situation. Whether you’re already receiving benefits or planning for retirement, being prepared for these changes can help you manage your expectations and finances in the year ahead.
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