Key Changes to Social Security Benefits in 2025: What You Need to Know
The new year often brings significant adjustments, especially regarding jobs and healthcare. As individuals navigate resolutions aimed at improving their lives, they must also adapt to adjustments made by the government in laws concerning taxes, retirement accounts, and Social Security. Here are five crucial Social Security updates to keep in mind for 2025.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »
Image source: Getty Images.
1. Cost-of-Living Adjustment (COLA) Increased to 2.5%
The Social Security Administration introduced a 2.5% cost-of-living adjustment (COLA) that applies to December 2024 benefits. Since benefits are paid in the month following their due date, beneficiaries will first receive the adjusted amount this January. The payment dates depend on the birth date:
- Born on the 1st through the 10th: Jan. 8, 2025
- Born on the 11th through the 20th: Jan. 15, 2025
- Born on the 21st through the 31st: Jan. 22, 2025
Additionally, those receiving Supplemental Security Income (SSI) should have received their first check on Dec. 31, 2024, typically paid on the first of each month unless that day falls on a weekend or holiday.
2. Increased Earnings Required for Work Credits
To earn Social Security work credits in 2025, workers must earn more money. A total of 40 credits is necessary to qualify for retirement benefits, with a maximum of four credits allowed per year. In 2024, you could earn one credit for every $1,730 earned; in 2025, this will increase to $1,810. Most workers, including part-timers, should find earning the necessary total of $7,240 manageable.
3. Higher Payroll Tax Wage Base
Due to an increase in the taxable wage base, some workers might experience a rise in Social Security payroll taxes in 2025. In 2024, these taxes were only applied to the first $168,600 of earnings, but this limit increases to $176,100 in 2025. For higher earners, this could lead to an additional $465 in taxes annually for traditional employees or $930 for self-employed individuals.
4. Increased Limits on Earnings Test
Retirees working while claiming Social Security before reaching their full retirement age (FRA) can earn slightly more in 2025 before affecting their benefits. Those at or above their FRA do not face withholding regardless of their income. For 2024, the earnings limit was $22,320, with a reduction of $1 for every $2 earned over that. In 2025, this limit rises to $23,400. Similarly, the earnings limit for those reaching their FRA in 2024 increases from $59,520 to $62,160.
5. Gradual Change in Full Retirement Age
This year marks a full retirement age of 66 years and 10 months for individuals born in 1959. The FRA has been rising gradually and will reach 67 for those born in 1960 and later. Although individuals can claim benefits starting at age 62, claiming early could reduce checks by up to 30%. It’s crucial for potential retirees to consider their options carefully before making a claim to avoid future financial disadvantages, unless urgent health or monetary circumstances dictate otherwise.
The above adjustments to Social Security for 2025 are typical annual changes. Understanding these rules is essential for both current workers and retirees, as they will likely continue in future years.
The $22,924 Social Security Bonus Many Overlook
If you find yourself behind on retirement savings, you’re not alone. However, there are lesser-known “Social Security secrets” that may help boost your retirement income. One simple strategy could increase your annual benefits by as much as $22,924. Understanding how to maximize your Social Security benefits could provide peace of mind for your retirement. Click here to learn more about these strategies.
View the “Social Security secrets” »
The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
