Not just the COLA increase: here are the two big changes that will affect Social Security payments in 2025
The Social Security Administration announced a 2.5% increase for benefits in 2025, but there are other changes coming next year. Here’s what to know about.
Every year the Social Security Administration announces the annual cost-of-living adjustment, better known as COLA. This year, with inflation slowing, the increase that will be applied was 2.5%, smaller than the 3.2% that was announced last year.
This adjustment affects all benefits that the SSA pays out to retired workers, their spouses and survivors, as well as disabled workers and their family members. Additionally, adults and children with disabilities may be eligible for Supplemental Security Income (SSI).
Beneficiaries will see the 2.5% boost to the payments they receive starting with those disbursed corresponding to January 2025. But that isn’t the only change coming next year.
Here are the two big changes that will affect Social Security payments in 2025
The 2025 COLA will also affect the amount of taxable income that you will have to pay Social Security taxes on. Next year the maximum taxable amount will be $176,100.
Work credit requirements will be increased
Recipients of Social Security payments must have earned at least 40 work credits to be eligible, assuming they are not claiming on the work history of their spouse.
The maximum amount you can earn in a year is four credits, but you have to have made a certain amount of money to do so. In 2024 the amount is $1,730 per credit, also called ‘quarter of coverage’, but in 2025 that will increase to $1,810. For low earners or part-time workers, that could mean that you won’t receive the full four credits next year.
An increasing retirement age
Annually, the Full Retirement Age increases by two months for those born after 1955. This incremental pattern culminates in a Full Retirement Age of 67 for individuals born in 1960 and beyond.
Consequently, individuals born in 1958 will meet the eligibility criteria for Full Retirement Age in 2024, who are 66 years and 10 months. And you must be that age for a full month before you can claim without being penalized.
Those that aren’t quite ready to retire can increase their maximum Social Security benefits if they keep working until they are 70.