Finance
The truth about 2025 Social Security increases (and what it means for you)
With the festive season upon us and the new year quickly coming into view, COLA recipients, retirees and others will want to be across the changes.
As 2025 rapidly approaches, millions of Americans relying on Social Security are set to see some changes – most notably, a 2.5% Cost-of-Living Adjustment (COLA). While this adjustment is intended to help recipients keep up with rising costs, it’s just one piece of the puzzle. Let’s break down the key updates and what they mean for your wallet.
The 2025 changes to Social Security benefits
A 2.5% COLA offers modest relief
The 2.5% COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Here’s what this means in real terms:
- The average monthly benefit for retired workers will increase from $1,927 to $1,976.
- Couples, where both are receiving benefits, will see their monthly income rise from $3,014 to $3,089.
While every little bit helps, some worry that this bump won’t fully keep pace with rising costs in housing, healthcare, and other essentials. For many, the increase may feel more like a small patch than a full fix.
Higher maximum taxable earnings: bigger contributions for bigger benefits
If you’re still working, the earnings subject to Social Security taxes are increasing:
- 2024 limit: $168,600
- 2025 limit: $176,100
This means higher earners will pay more into the system. While this can sting, the upside is that higher contributions now can lead to larger benefits down the road.
In related news: Social Security Fairness Act may die by year-end
Increased earnings limits for working retirees
If you’re working while collecting Social Security benefits, the amount you can earn without seeing a reduction in your benefits is going up:
- Under full retirement age: You can earn up to $23,400/year ($1,950/month)—an increase from $22,320/year.
- The year you reach full retirement age: The limit rises to $62,160/year ($5,180/month), up from $59,520/year.
Exceeding these limits will result in some benefits being temporarily withheld, but once you reach full retirement age, those withheld amounts are recalculated into your benefit.
Disability beneficiaries get a boost
For those receiving Social Security Disability Insurance (SSDI), the monthly earnings thresholds are increasing:
- Non-blind beneficiaries: Up from $1,550 to $1,620/month.
- Blind beneficiaries: Up from $2,590 to $2,700/month.
Additionally, the Trial Work Period threshold—which allows recipients to test employment while retaining benefits—rises to $1,160/month. This small but meaningful increase helps beneficiaries explore job opportunities without immediate penalties.
In related news: Find the best way to save in your 401(k) in 2025
SSI recipients see modest increases
Supplemental Security Income (SSI) payments are also getting a small boost:
- Individuals: Payments will rise from $943 to $967/month.
- Couples: Payments increase from $1,415 to $1,450/month.
For recipients, this slight adjustment provides a bit of relief, though critics argue that it doesn’t fully address the financial struggles many SSI beneficiaries face.
Maximum benefits climb for full-retirement workers
If you’re retiring at full retirement age in 2025, you’ll see an increase in the maximum monthly benefit:
- 2024: $3,822/month
- 2025: $4,018/month
This higher limit rewards those who’ve maximized their earnings and waited to claim benefits, offering a more comfortable retirement cushion.
In related news: Say goodbye to $1,730 SS earnings requirement in 2025
Student exclusions rise, but resource limits remain stagnant
For students receiving SSI, the exclusion limit increases slightly:
- Monthly: Up to $2,350 (from $2,290)
- Annual: Up to $9,460 (from $9,230)
However, the SSI resource limits – $2,000 for individuals and $3,000 for couples - remain unchanged, sparking some debate about the perceived need to amend the thresholds.
Advice on how to prepare for 2025
- Review your benefits: Visit the Social Security Administration’s website to understand how these changes apply to you.
- Plan for tax adjustments: If you’re a high earner, ensure you’re prepared for the increased taxable earnings cap.
- Supplement your income: Consider part-time work, investments, or other income sources to bridge any gaps.
Social Security remains a cornerstone of financial stability for millions. By staying informed and proactive, you can maximize your benefits and better navigate the changes in 2025.
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