The Social Security Administration has been around for almost 90 years, but there have been big changes since it was first set up. It is now getting ready for changes that could be big and affect a lot of people in 2025.
It is important to know about these changes so you do not get caught off guard, whether you are already getting benefits or planning your retirement.
We found out about two big changes that will be made to Social Security next year. These changes will affect more than 72 million people who get benefits from the Supplemental Security Income (SSI) and Retirement, Survivors, and Disability Insurance (RSDI) programs.
2 important Social Security changes that will impact beneficiaries in 2025
A small increase is being made to Social Security benefits
Let us start with some good news: Social Security payments will go up by 2.5% in 2025 because of the cost-of-living adjustment (COLA). The average monthly Social Security payment will go up from about $1,930 to $1,980 after the 2025 COLA is put into place.
Starting in January, the average retiree’s benefits will go up by $50 a month. On the other hand, if you have Medicare Part B, those premiums may lower your increase.
In general, this news probably is not making you very happy. A recent poll of 2,000 retirees by the Motley Fool found that 54% of those polled thought the cost of living adjustment for the next year would not be enough. Also, that is not a surprise.
The same survey found that because of inflation, 62% of retirees have cut back on spending on things they do not need. However, is the new cost of living adjustment (COLA) good or bad for people in the United States?
For some background, let us look at COLAs from the past. There have been some really important changes in the last few years: 3.2% in 2024, 8.7% in 2023, and 5.9% in 2022.
With those big gains, the 2.5% COLA for 2025 might seem like a letdown. Inflation is slowing down, as shown by the 2.5% increase in Social Security. The 2025 COLA is directly linked to inflation.
Besides that, this change is not the worst. Remember that people who got Social Security did not get any raises in some years, like 2010, 2011, and 2016. Another thing to keep in mind is that the COLA increase in 2020 was 1.6%, but it was only 1.3% in 2021.
Earning more while receiving Social Security benefits is increasingly possible
It is pretty common to work while getting Social Security benefits, which might surprise you. The average Social Security payment is $1,920.48 a month, which is not always enough for many retirees to cover their costs.
The same Motley Fool poll found that almost half of retirees are thinking about going back to work because their retirement money is not enough to cover their costs.
I have some good news for people who want to keep working or go back to work while getting Social Security: The most that Social Security will pay out will go up in 2025. Here is what you need to know about the earnings-test limit and how it might change your benefits.
- Early filers’ earnings-test limit: In 2025, the earnings-test limit will rise to $23,400 if you begin receiving Social Security benefits before you reach full retirement age (FRA), which is age 67 for anyone born in 1960 or later. It is higher than $22,320 in 2024. By doing this, you can earn an additional $1,080 before the Social Security Administration begins deducting $1 from your benefits for every $2 that you make over the cap.
- Limit on earnings-test for individuals who attain FRA in 2025: If you reach full retirement age in 2025, the earnings-test limit will be significantly higher. It reaches $62,160, which is more than the $59,500 in 2024. After that, if the earnings-test limit is exceeded by $3, $1 will be subtracted.
