Social Security benefits in 2025: 5 big changes retirees should plan for

If you’re retired or planning to retire soon, it’s important to have a plan for your retirement income. For most people, Social Security will play a significant role in this plan, so staying up to date on the latest benefits information is crucial.

The Social Security Administration (SSA) recently announced several key changes to the program for 2025, including its annual cost of living adjustment (COLA). Here are some key changes to Social Security happening next year – and what you need to know.

Watch for these 5 changes to Social Security in 2024

More than 72.5 million people depend on one of Social Security’s benefit programs, so annual changes to the program and its payouts are always highly anticipated. 

This year’s cost-of-living adjustment (COLA) is lower than last year’s 3.2 percent increase. Still, any additional income is a welcome boost for beneficiaries who live on fixed incomes. (If you need help developing a plan for your retirement income, you may want to consider hiring a financial advisor.)

1. Cost of living adjustment (COLA) rises

The SSA has announced that benefit checks will rise 2.5 percent in 2025. The 2.5 percent adjustment will amount to an average increase of $50 in monthly benefits for retired workers on Social Security beginning in January.

Specifically, the average check for retired workers will increase from $1,927 to $1,976. For a couple with both partners receiving benefits, the estimated payment will increase from $3,014 to $3,089.

The SSA has linked COLA adjustments to the Consumer Price Index for urban wage earners and clerical workers (CPI-W) since 1975. To determine the COLA, the SSA compares the third-quarter CPI-W of the previous year to the third-quarter CPI-W of the current year. The COLA is then adjusted based on the percentage change in CPI-W from one year to the next.

2. Maximum taxable earnings going up

In 2024, the maximum earnings subject to Social Security taxes was $168,600. This means workers paying into the system are taxed on wages up to this amount, typically at the 6.2 percent rate. In 2025, the maximum earnings will increase to $176,100, meaning more of a worker’s income will be subject to the tax. This adjustment is due to an increase in average wages in the U.S.

3. Maximum Social Security benefit also set to increase

The maximum Social Security benefit for a worker retiring at full retirement age will increase from $3,822 in 2024 to $4,018 in 2025. This maximum applies to those retiring at the full retirement age, which is 67 for anyone born after 1960.

The maximum benefit will be lower for those who retire before the full retirement age because benefits are reduced in such cases. On the flip side, those who retire after the full retirement age can increase their maximum benefit by delaying retirement.

4. Average benefit for spouses and disabled workers is increasing, too

The average benefit will increase across the board in 2025, and that includes benefits for people such as widows, widowers and the disabled. Here’s how those figures break out:

• The SSA says the average widowed mother with two children will see an increase from $3,669 to $3,761.

• Aged widows and widowers living alone will see their benefits increase from $1,788 to $1,832.

• The benefit will increase for a disabled worker with a spouse and one or more children from $2,757 to $2,826.

Of course, those are averages, and individual situations may differ. 

5. Social Security adjusts earnings test exempt amounts

If you receive Social Security retirement benefits before reaching full retirement age, the program may reduce your benefits if your earnings exceed certain limits. This is known as the retirement earnings test, and it can claim a serious chunk of your benefits if you are still working. In 2025, the retirement earnings test exempt amounts will be as follows:

If you start collecting Social Security before full retirement age, you can earn up to $1,950 per month ($23,400 per year) in 2025 before the SSA will start withholding benefits, at the rate of $1 in benefits for every $2 above the limit. In 2024, the maximum exempt earnings were $1,860 per month ($22,320 per year).

In the year you reach full retirement age, this rule still applies but only up until the month you hit full retirement age and with much more forgiving terms. In 2025, you can earn up to $5,180 per month ($62,160 per year) before benefits are withheld, at the rate of $1 in benefits for every $3 earned above the limit (instead of every $2). In 2024, the threshold was $4,960 per month ($59,520 per year).

Bottom line

The 2025 Social Security COLA provides retirees and others with an increase in their benefits. However, this isn’t the only change to the program. Other levels and thresholds have also been adjusted to reflect ongoing cost increases.