Social Security has been a cornerstone of retirement planning for nearly 90 years. Over time, the program has seen significant updates, and more adjustments are coming in 2025. Whether you’re currently receiving benefits or preparing for retirement, understanding these changes is key to making informed financial decisions.
Here are two major updates to Social Security in 2025 and what they could mean for you.
1. A Modest Increase in Benefits
Good news first: Social Security benefits are set to increase by 2.5% in 2025, thanks to the annual cost-of-living adjustment (COLA). For the average retiree, this means monthly payments will rise from $1,927 to $1,976—about $50 extra per month starting in January.
However, if you’re enrolled in Medicare Part B, rising premiums could reduce the impact of this increase.
While any raise is welcome, many retirees may find the 2025 adjustment underwhelming. A recent survey by The Motley Fool of 2,000 retirees found that 54% believe the upcoming COLA isn’t sufficient. Moreover, 62% of respondents reported cutting back on nonessential spending due to inflation.
To put the 2025 COLA in perspective, let’s look at recent adjustments:
- 2024: 3.2%
- 2023: 8.7%
- 2022: 5.9%
Compared to these, 2025’s 2.5% increase might feel lackluster. But it’s not all bad news—this smaller COLA reflects cooling inflation. Plus, it’s better than no increase at all, as happened in 2010, 2011, and 2016, or the tiny adjustments of 1.3% (2021) and 1.6% (2020).
2. Higher Earnings Limits for Working Retirees
If you’re working while collecting Social Security, you’ll see a key change in 2025: an increase in the earnings limits before benefits are withheld.
Here’s what’s changing:
- For early filers (under full retirement age):
The earnings-test limit will increase from $22,320 in 2024 to $23,400 in 2025. This means you can earn an additional $1,080 before $1 is withheld from your benefits for every $2 earned above the limit. - For those reaching full retirement age (FRA) in 2025:
The limit will rise from $59,520 to $62,160. For earnings above this amount, $1 is withheld for every $3 earned.
Once you reach full retirement age (67 for those born in 1960 or later), the earnings test no longer applies. Even better, any benefits withheld due to the earnings test are credited back to you, resulting in higher payments later on.
Plan Ahead for 2025
Whether you’re relying on Social Security or supplementing it with other income, these updates highlight the importance of staying informed. While the COLA adjustment may feel modest, higher earnings limits could benefit those balancing work and retirement.
Unlock Hidden Social Security Bonuses
Did you know there are strategies that could significantly boost your Social Security income? Some lesser-known tips could add as much as $22,924 annually to your retirement benefits. Learning how to maximize your benefits can provide peace of mind and set you up for a more comfortable retirement.
Take the time to explore these opportunities—you’ll thank yourself later!
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