Current Social Security recipients are surely aware of the changes that 2025 will bring. After all, the program changes yearly, but only in small ways, and those who are used to dealing with the changes do not usually get taken by surprise any longer.
But those who are entering this year into the Social Security Administration’s umbrella may be a bit less at ease with the inner workings of the programs it runs and the yearly changes they go through to ensure they keep up with the times.
Here Are Some Of The Changes That Are Coming In 2025
Cost of living Adjustment of Social Security benefits and Medicare. Every year, benefits go through a cost of living adjustment (COLA) that aims to ensure that beneficiaries do not lose purchasing power and are able to keep up their standard of living. This year the COLA (calculated using the CPI-W from the third quarter of the year) has been announced at 2.5%.
This small boost can be a good thing for retirees as it means that inflation is finally going down, and, despite popular belief, is quite in line with other increases that the last decade has seen, averaging at 2,6%, just 0.1% lower than the average.
For those who are unsure of what that would translate to, the average monthly Social Security retirement benefit will be increased by $48 and $39 for workers with disabilities.
Sadly, benefits are not the only thing that is increasing, and if that COLA seems meager to some, it will be compounded by the fact that Medicare premiums are going up, especially Part B, which is rising from $174.70 per month to $185.
Medicare premiums are taken out of Social Security pension before they hit beneficiaries’ accounts, so most of them will receive a smaller increase.
But there are other changes with the start of the new year. Medicare premiums are going up, as they do nearly every year, rising from $174.70 per month to $185. That extra charge will erode some of the Social Security payment increase.
The Earnings Test Limit Is Increasing
This is good news for those workers who continue to bring home an income while receiving retirement benefits. These workers are subjected to what is commonly known as the Earnings Test Limit, which means that any income over a certain amount that they earn will reduce their benefits.
How Much Will Depend On Whether Or Not You Are Turning Full Retirement Age In 2025?
The earning limit for those who will not be turning full retirement age in 2025 is $23,400, and a $1 reduction for every $2 over the limit will be applied to benefits. For those who will be turning full retirement age in 2025, the annual exempt amount is $62,160, and a $1 reduction for every $3 over the limit will be applied to benefits.
Higher Maximum Benefit
Every year, the Social Security Administration raises the maximum amount of benefits to cover all types of benefits. The most commonly known is the retirement benefit, which, in 2025, will increase from $4,873 in 2024 to $5,108 per month. To get this maximum benefit, you have to meet quite strict eligibility criteria, which require working at least 35 years and consistently earning at or above the maximum taxable limit, set at $176,100 next year. Recipients must also delay benefits until age 70 to qualify for the maximum payout.
For those who started benefits earlier, the maximum monthly amounts are lower. At age 62, the maximum will be $2,831, while those who began at age 67 can receive up to $4,043. Delaying benefits continues to offer significant financial advantages.
