With Social Security playing a crucial role in retirement planning for millions of Americans, staying informed about changes to the program is essential, Bankrate reports.
The Social Security Administration (SSA) recently announced important updates for 2025, including a cost-of-living adjustment (COLA) and changes to various benefits thresholds. Here are the five major changes to Social Security that retirees should prepare for in the upcoming year.
1. Cost of Living Adjustment (COLA) to Rise 2.5%
Social Security benefits will increase by 2.5% in 2025, giving retirees a welcome boost to their monthly checks. For the average retired worker, this means an increase from $1,927 to $1,976 per month, amounting to an additional $50 monthly. Couples receiving benefits can expect their combined payments to rise from $3,014 to $3,089. The SSA adjusts COLA annually based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to account for inflation.
2. Maximum Taxable Earnings to Increase
The earnings subject to Social Security taxes will rise in 2025, with the maximum taxable income increasing from $168,600 in 2024 to $176,100. This means more of higher earners’ income will be subject to Social Security taxes, helping to fund the program as wages continue to grow across the US.
3. Maximum Social Security Benefit Set to Rise
For workers retiring at full retirement age, the maximum Social Security benefit will also increase in 2025, from $3,822 to $4,018 per month. Full retirement age for those born after 1960 is 67. While benefits are reduced for those retiring earlier, delaying retirement past full retirement age can increase the maximum benefit.
4. Increases for Spouses, Widows, and Disabled Workers
Benefit increases aren’t limited to retirees. The SSA has announced that widows, widowers, and disabled workers will also see higher payouts in 2025. For instance, a widowed mother with two children will see an increase from $3,669 to $3,761 per month, while aged widows living alone will see their benefits rise from $1,788 to $1,832. Similarly, a disabled worker with a spouse and children will experience an increase from $2,757 to $2,826.
5. Adjustments to Retirement Earnings Test Exempt Amounts
For those who start receiving Social Security benefits before reaching full retirement age and continue working, the SSA has raised the earnings test exempt amounts. In 2025, individuals under full retirement age can earn up to $1,950 per month ($23,400 annually) before benefits are reduced. For those reaching full retirement age in 2025, the exempt amount rises to $5,180 per month ($62,160 annually), with more favorable terms for withholding.
These changes to Social Security in 2025 provide increases in benefits for retirees and others who rely on the program. From higher payouts due to COLA to increased taxable earnings and benefit thresholds, these adjustments are designed to help beneficiaries keep pace with rising costs. Understanding these updates is key to ensuring financial security in retirement.
