5 Key Changes to Social Security in 2025
Social Security is a cornerstone of financial stability for millions of Americans, and 2025 brings several significant updates. These changes aim to adapt benefits to economic realities like inflation while continuing to support beneficiaries. Here’s a deeper dive into what you need to know:
1. Cost-of-Living Adjustment (COLA) Increase
Social Security benefits will rise by 2.5% in 2025, a smaller adjustment than 2024's 3.2% increase. The 2025 adjustment reflects cooling inflation rates, ensuring benefits maintain their purchasing power without overcompensation. The average check for retired workers is increasing from $1,927 to $1,976.To determine the COLA. the SSA compares third-quarter CPI-W (Consumer Price Index for urban wage earners and clerical workers) of the previous year to third-quarter CPI-W of the current year.
2. Maximum Taxable Earnings Increase
In 2024, the maximum earnings subject to Social Security taxes were $168,000. In 2025, the maximum earnings will increase to $176,100, meaning more of a worker’s income will be subject to the tax. This is due to the increasing average wages in the U.S.
3. Maximum Social Security Benefits Increase
In 2024, the maximum Social Security benefit for a worker retiring at full retirement age was $3,822, but in 2025 this will increase to $4,018. This applies to those retiring at 67 or later, and the benefit will be lower for those who retire sooner.
4. Average Benefit for Spouses & Disabled Workers Increase
The benefit will increase across the board in 2025, including widows, widowers, and the disabled.
The SSA says the average widowed mother of 2 children will increase from $3,669 to $3,761.
Aged windows and widowers living alone will see an increase of $1,788 to $1,832.
Disabled workers with a spouse and one or more children will have an increase of $2,757 to $2,826.
5. Social Security Adjusts Earnings Test Exempt Amounts
If you are receiving Social Security retirement benefits before reaching full retirement age (67), they may reduce your benefits if your earnings exceed a certain amount. If you start collecting Social Security before full retirement age, you can earn up to $1,950 per month in 2025 before the SSA will start withholding benefits. In the year you reach full retirement age, this rule still applies but only up until the month you hit full retirement age. In 2025, you can earn up to $5,180 per month before benefits are withheld.
Why These Changes Matter
The updates to Social Security for 2025 reflect a careful balance between addressing inflation, encouraging workforce participation among retirees, and ensuring the program's long-term viability. For beneficiaries, understanding these changes is crucial for effective financial planning.
Whether you’re managing a fixed income, exploring part-time work, or maximizing your benefits, these adjustments offer valuable opportunities and challenges. To prepare, review your Social Security statement, reassess your budget, and consider consulting a 4Wealth financial advisor.
