Major Changes Coming to Social Security in 2025 – Retiree Checks to Increase

Change can be scary, especially when it arrives unexpectedly or against our wishes. However, change is a constant in life and can sometimes have a positive impact. This holds true for Social Security and the yearly policy updates the program undergoes to ensure recipients and contributors receive the best conditions suited to current times. In 2025, several positive changes to Social Security are anticipated. Here are three such expected improvements.

Benefit Increase

Social Security benefits generally receive an annual cost-of-living adjustment (COLA) to help maintain their purchasing power as living expenses rise. While there have been years without a COLA due to low inflation, most retirees count on this adjustment. Despite high inflation in 2022 following the pandemic, inflation has since been rising steadily but at a more manageable rate in 2024. Seniors affected by inflation may not fully agree with the 2024 COLA, but it has generally kept pace.

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For 2025, Social Security benefits are anticipated to increase, though the exact amount remains uncertain as the COLA is based on third-quarter inflation data from the prior year. The Senior Citizens League, a nonpartisan advocacy group for senior issues, forecasts a 2.57% COLA for 2025. While this is less than the 3.2% increase beneficiaries received at the start of 2024, it still represents a meaningful rise in benefits, consistent with the decade’s average increases.

Maximum Monthly Benefit Increase

Social Security taxes are not applied to all wages. There is a cap on the wage amount subject to Social Security taxes, which adjusts annually. Likewise, there is a cap on the benefits that seniors can receive. Unlimited taxing and benefits are not scalable for the Social Security Administration (SSA), so limits are applied. For 2024, the maximum benefit for someone retiring at full retirement age is $3,822 per month. This amount is expected to increase in 2025.

Only high earners who have contributed the maximum amount for 35 years qualify for Social Security’s maximum monthly benefit. If you are among these high earners planning to retire in 2025, you can look forward to a higher maximum monthly benefit. However, even one year below the contribution cap will result in a slightly lower benefit. Nonetheless, it remains a substantial benefit.

Higher Earnings-Test Limit

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Many believe that working while collecting Social Security benefits is not possible, but this is a misconception. You can work and receive Social Security benefits simultaneously. However, if you are below full retirement age and your earnings exceed a certain threshold, known as the earnings-test limit, a portion of your benefits may be withheld.

In 2024, the earnings-test limit is $22,320 for those below full retirement age. For individuals reaching full retirement age during the year, the limit is $59,520. These limits are expected to increase in 2025, allowing beneficiaries to earn more without worrying about withheld benefits and improving their quality of life.

Importantly, any benefits withheld due to exceeding the earnings-test limit are not permanently lost. These withheld benefits will be added back to your monthly payments once you reach your full retirement age.

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While change can be daunting, the anticipated updates to Social Security in 2025 promise positive outcomes for many beneficiaries. The expected increase in benefits through the COLA, a higher maximum monthly benefit for high earners, and an increased earnings-test limit all contribute to a better financial outlook for retirees. Staying informed about these changes and knowing how they impact your financial planning is crucial for maximizing your benefits and ensuring a secure retirement.

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