Social Security Benefits in 2025

If you’re nearing retirement or already enjoying it, staying informed about changes in Social Security benefits is essential. These benefits often play a significant role in most retirees’ income. For 2025, the Social Security Administration has announced several important updates that could affect your financial planning.

Key Changes to Social Security in 2025

1. Cost of Living Adjustment (COLA) Increases
   In 2025, Social Security benefits will see a 2.5% increase due to the cost of living adjustment. For example, if you’re a retired worker whose average monthly benefit was $1,927 in 2024, your new monthly benefit will be approximately $1,976. For a couple with both partners receiving benefits, the estimated payment will increase from $3,014 to $3,089. This increase is designed to help your benefits keep pace with inflation.
2. Maximum Taxable Earnings Increase
   The maximum amount of earnings subject to Social Security taxes will rise from $168,600 in 2024 to $176,100 in 2025. This adjustment means that individuals with higher incomes will pay Social Security taxes on more of their earnings.
   Example: If Lisa earns $200,000 in 2025, she will pay Social Security taxes on $176,100 of her income, up from $168,600 the previous year.
3. Increase in Maximum Social Security Benefit
   The maximum Social Security benefit for a worker retiring at full retirement age (67 for those born after 1960) will increase from $3,822 per month in 2024 to $4,018 per month in 2025.
   Example: Tom, planning to retire at age 67 in 2025, will now be eligible for a maximum monthly benefit of $4,018, provided he has reached the maximum taxable earnings each year of his career.
4. Increase in Average Benefits for Spouses and Disabled Workers
   Average benefits for other roles such as widows, widowers, and disabled workers will also see an increase. For instance, the benefit for a widowed mother with two children will rise from $3,669 to $3,761.
   Example: Sarah, a widowed mother of two, will receive an increase in her monthly benefits, aiding her in managing household expenses.
5. Adjustments to the Earnings Test Exempt Amounts
   The earnings test exempt amounts will be adjusted in 2025. You can earn up to $1,950 per month before your Social Security benefits are reduced if you are under full retirement age. Once you reach full retirement age, you can earn up to $5,180 per month before any reductions.
   Example: Mark, who is 64 and still working, earns $2,000 per month. Since this is $50 over the limit, his Social Security benefits will be reduced by $25 per month (at the rate of $1 in benefits for every $2 above the limit).

Key Financial Terms Defined:

• Cost of Living Adjustment (COLA): An annual adjustment in wages or benefits that increases or decreases based on the government-calculated cost of living and inflation rates.
• Taxable Earnings: The portion of an individual’s or a corporation’s income used to determine how much tax they must pay the government in a given year.
• Maximum Benefit: The highest possible monthly payment an individual can receive from Social Security in retirement at full retirement age or older.
• Earnings Test: A method used by the SSA to determine how much a Social Security recipient’s benefits should be reduced based on their earnings from work.
• Full Retirement Age (FRA): The age at which a person may first become entitled to full or unreduced retirement benefits from Social Security. This age depends on the year of birth.