3 Key Social Security Changes Coming in 2025 Besides the 2.5% COLA

Your Social Security payments, your retirement benefits will increase in 2025 due to a 2.5% cost-of-living adjustment (COLA).
The age at which you can claim full Social Security benefits will increase next year.

Next year, your retirement benefits  income limits will increase, allowing early retirees to earn more before some of their benefits are withheld.
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The Social Security program annual reflect:

The Social Security program is revised annually to reflect changes in wages and prices throughout the economy. Because benefits are often the largest source of income for retirees, understanding these changes can mean the difference between careful financial planning and making costly mistakes. Most readers probably know that Social Security payments are adjusted annually based on the cost of living to protect the purchasing power of benefits from inflation. For example, beneficiaries in 2025 will receive a 2.5% COLA, but more significant changes are planned for Social Security next year.

Also Read : Elon Musk and Social Security: A Potential Threat to Retirement Security


Full Retirement Age is the eligibility age at which the benefits given to a retiree are equal to his/her Primary Insurance Amount (PIA) (another name for basic benefit). As shown in the table below, when an employee reaches retirement age depends on their date of birth.

 

Here’s a breakdown of the Social Security FRA for different birth years:

 

As shown above, two groups of beneficiaries reached FRA in 2024.
(1) Workers born in late 1957 reach their FRA between January and June 2024 at age 66 years and 6 months.
(2) Workers born in the first 4 months of 1958 reach their FRA between September and December 2024 at age 66 years and 8 months.
The FRA will be raised to 2025, and (1) workers born in the last 8 months of 1958 will reach their FRA by January-August 2025 at 66 years and 8 months, and (2) workers born in the first 2 months of 1958-1959 will reach their FRA by November-December 2025 at 66 years and 10 months.

Why it matters: Eligibility age is an important factor in the amount of payments. Workers who claim  retirement benefits before their FRA receive reduced benefits, so their payments are less than 100% of their PIA. However, workers who claim Social Security benefits based on their FRA will receive higher benefits, so their payments will exceed 100% of the PIA.

 

Social Security retirement benefit caps will rise in 2025:
The government benefits for retirees are based on lifetime earnings and eligibility age. In particular, the higher your earnings and eligibility age, the higher your benefits will be. However, the formula for calculating benefits is adjusted annually to reflect changes in average wages. Generally, as wages increase over time, so do maximum Social Security benefits. The table below shows the maximum Social Security benefits for retirees of various eligibility ages in 2025.

Eligible Age :

Maximum Social Security Benefit:
Claim Age-Social Security Benefit
62 –$2,831

65-$3,374

66-$3,795

67-$4,043

70-$5,108

Why it matters: Very few workers earn enough to qualify for maximum  benefits. This requires earning above a maximum taxable income threshold for 35 years, but fewer than 7% of workers meet this requirement annually. But this table still teaches us an important lesson: if Social Security starts at age 70 (the latest reasonable eligibility age), the payments will be much higher than if it starts at age 62 (the earliest possible eligibility age).

 

The Social Security Retirement Earnings Test (RET) amount will increase in 2025

Workers who file for the government benefits before FRA will have some of their benefits temporarily withheld if their income exceeds certain limits called the Retirement Earnings Test (RET) amount. There are two thresholds, the updated amounts for 2025 are explained below.

The lower limit is $23,400. This means that workers younger than FRA will lose $1 in benefits for every $2 they earn above the RET lower limit each year.

The upper limit is $62,160. This means that workers who reach full retirement age during the year will lose $1 in benefits for every $3 they earn above the RET upper limit. Importantly, once an employee reaches FRA, the RET limit plays no role. From this point on, benefits are no longer withheld, regardless of earnings. In addition, once a worker reaches full retirement age, the previously withheld benefits are gradually repaid, resulting in the return of most or all of the normal lifetime your retirement benefits.

Why it matters:

The RET limit is adjusted annually based on average wage levels, and as a result, early enrollees (i.e., workers who receive the government benefits before full retirement age) can usually earn a little more before benefits are withheld. For example, compared to the 2024 RET limits, the lower limit will increase by $1,080 and the upper limit will increase by $2,640 in 2025. The $22,924 Social Security bonus that most retirees completely overlook If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But some little-known “Social Security secrets” could help you boost your retirement income.

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