Major Changes in Social Security Affecting Millions of Americans in 2025

For 85 years, Social Security has been a vital support system for older Americans unable to support themselves. According to the Center on Budget and Policy Priorities, this program lifts 22.7 million people out of poverty each year, including 16.5 million seniors aged 65 and older.

Although Social Security has remained a cornerstone of American financial security for decades, it undergoes annual updates. With the arrival of the new year, six important changes to Social Security are now in effect.

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1. Bigger Social Security Checks Are Coming

Each year, one of the most awaited announcements regarding Social Security is its cost-of-living adjustment (COLA).

COLA helps the Social Security Administration (SSA) ensure benefits keep pace with inflation. If the overall price of items retirees frequently purchase increases, Social Security benefits are adjusted accordingly to maintain purchasing power.

In 2025, Social Security benefits will increase by 2.5%, the smallest increase in four years, but it marks the fourth consecutive year that COLAs have exceeded the average over the last 15 years, which was about 2.3%.

On average, retired workers can expect their monthly payments to rise by $49 to $1,976. Meanwhile, workers with disabilities and survivor beneficiaries can expect their payments to grow by $38 each month to $1,580 and $1,551, respectively, in 2025.

Despite these increases, persistent high costs for housing and healthcare, along with rising Medicare Part B premiums, may diminish the real purchasing power of these checks.

2. Higher Taxes for High Earners

Changes this year affect more than just current beneficiaries. A new year also means that high-earning workers might face larger tax bills.

Social Security is mainly funded through a 12.4% payroll tax on earned income. In 2024, income between $0.01 and $168,600 was subject to this tax.

Starting today, all income between $0.01 and $176,100 will face a 12.4% payroll tax. This upper limit is adjusted annually based on the National Average Wage Index.

Fortunately, about 94% of workers earn less than the taxable earnings cap and won’t be affected by this change. However, the 6% of higher-earning individuals may see their tax liability increase by up to $930 if self-employed or $465 if employed by someone else this year.

3. Maximum Monthly Benefit for Retirees Increases

While high earners will face bigger tax bills, retirees who have made it to the maximum benefit bracket will receive a larger monthly payment in 2025.

This year, the maximum monthly benefit for retirees at full retirement age will be $4,018, up from $3,822 in 2024. Full retirement age is when workers can receive their total monthly benefit without reductions.

Only about 2% of beneficiaries achieve this maximum benefit, which is difficult due to three requirements: waiting until full retirement age to collect benefits, working at least 35 years and earning the maximum taxable amount in those years.

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4. Increased Withholding Thresholds for Early Filers

This year also brings significant adjustments for individuals who started collecting Social Security benefits before reaching full retirement age.

The program incentivizes retirees to delay claiming their payments. For each year they wait to begin receiving benefits between the ages of 62 and 70, their monthly benefit could increase by as much as 8%. However, those who claim at 62 accept a permanent reduction to their monthly benefit by 25% to 30%, depending on their birth year.

In addition, there’s a retirement earnings test that can withhold some or all benefits for early filers based on income.

For early filers who have not reached full retirement age in 2024, $1 in benefits could be withheld for every $2 earned above $22,320 (or $1,860 per month). This year, that threshold rises to $23,400 ($1,950 per month) without reduction.

For early filers who will reach full retirement age in 2025, benefits will be withheld at a rate of $1 for every $3 in earnings above $62,160 ($5,180 per month), up from $59,520 ($4,960 per month) in 2024.

Once an individual reaches full retirement age, the earnings assessment no longer applies, and previously withheld benefits can be restored as a higher monthly payment.

5. Increased Earnings Thresholds for Workers with Disabilities

Workers with disabilities, totaling more than 7.2 million, will also see changes in their income limits this year.

Last year, non-blind disabled workers could earn up to $1,550 monthly without losing benefits. This year, that limit increases by $70 to $1,620.

Blind disabled workers experience a larger increase, as they can now earn $2,700 without having their benefits cut, an increase of $110 per month.

6. Stricter Qualifying Criteria for Social Security Benefits

Finally, it will be slightly more challenging for workers to qualify for Social Security benefits this year.

Social Security benefits aren’t automatically available to all American citizens; they must be earned through work. A total of 40 lifetime work credits is required for retirement, survivor, or disability benefits, with a maximum of four credits earned each year.

This year, it will take $1,810 in earned income to acquire one work credit, meaning $7,240 is needed to reach the maximum of four work credits.

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