The cost-of-living adjustment (COLA) for 2025 was just released by the Social Security Administration. Starting next year, the average retiree can expect their Social Security check to go up by 2.5%, which is about $50 per month.
But Social Security will also change in other ways. As the year goes on, many new limits on income could have some effect on you.
Many of these changes will increase your monthly payment, but some will not be as helpful if you already make a good salary. What will happen in 2025?
A new $5,108 Social Security check will be eligible for beneficiaries in 2025
The maximum taxable earnings limit is the most money you can make before your Social Security check is cut off.
Your benefit will be bigger if your wages are close to this maximum, which is the most you can earn in a year before you have to pay Social Security taxes on it.
Remember that the yearly limit will go up to $176,100 in 2025 from $168,600 in 2024. The wage cap usually goes up every year because it is meant to keep up with changes in the cost of living.
All of the people who are affected by these restrictions should know that it may be worse for those with higher incomes. If your income is at or above the limit, you will have to pay taxes on a bigger chunk of it every year.
People who make between $168,600 and $176,100 a year may be affected by the 2025 increase the most, since they will have to pay Social Security tax on income that was not taxed in 2024.
With the current 12.4% payroll tax rate, which includes both employee and employer taxes, the extra $7,500 in income will mean an extra $930 in taxes each year.
The good news that beneficiaries might be unaware of regarding higher income limits
It might not be ideal to pay more taxes, but there is a good thing about it: you will eventually get a bigger benefit and might even be able to get the biggest monthly checks.
The biggest monthly benefit from Social Security will go from $4,873 to an amazing $5,108 in 2025.
You have to work for at least 35 years, wait until you are 70 years old to claim benefits, and keep making more than the maximum taxable earnings limit in order to get this payment.
Additionally, getting the biggest Social Security check is getting harder as the earnings limit keeps going up every year. If, on the other hand, your income is high enough to meet that income limit, you may have already gotten past the hardest part of getting this benefit.
Simpler ways to boost your Social Security check
What if your yearly income is less than $176,100? There are still ways to increase the amount of your compensation, even though that means you will not get the full amount.
One way to get more benefits is to wait to claim them. For every month you wait after age 62, you will get a little more money.
If you file at your full retirement age, which is either 66 or 67 years old depending on your birth year, you will get your full Social Security check. But if you wait until age 70, you will get at least a 24% bonus on top of that.
The Social Security Administration said in December 2023 that retirees get an average of $1,298 a month at age 62. That amount rises to $1,884 at age 67 and $2,038 at age 70.
If you can wait a few years or so before getting your checks, they will be much bigger as a result. You could also increase your payments by working longer than 35 years.
The first step in figuring out your Social Security check is to average your earnings over the 35 years of work that you made the most.
Your average only shows the years when you made the most money, so it is likely that you are making more money now than you were 35 years ago. It is possible to get a bigger benefit by replacing years of lower pay with more years of higher pay.
If you make a lot of money, a higher maximum earnings cap in 2025 might mean more taxes for you, but it will also bring you closer to getting a bigger Social Security check.
Even if you are late on a payment, small things you do can have a big effect on your monthly paycheck.
