Gear Up for These 3 Surprising Social Security Changes in 2025

Social Security has been in the news a lot given the program's financial shakiness and the potential for benefit cuts. And whenever there's an election, Social Security tends to be a big issue for politicians to discuss.

Because of this, you may have accidentally glossed over some of the changes that were announced for Social Security in 2025. But here are three you need to know about, whether you're retired and already collecting benefits or you're still in the midst of your career.

Image source: Getty Images.

1. Benefits are rising by 2.5%

Social Security is getting a cost-of-living adjustment in 2025. That's the good news.

The bad news, though, is that benefits are only increasing by 2.5% in January. That's a lot smaller than the 3.2% increase recipients got at the start of 2024.

Unfortunately, the bad news doesn't end there. It was recently announced that the cost of Medicare Part B is rising by $10.30 per month in 2025.

Not accounting for that, a 2.5% COLA results in an average increase of $49 per month in Social Security. But because many Social Security recipients are also enrolled in Medicare, that Part B premium hike is going to cut that increase down to more like $39.

2. There's more leeway to earn money from a job while collecting benefits

There are a few advantages to waiting until full retirement age arrives to claim Social Security. If you were born in 1960 or later, that age is 67.

If you hold off until full retirement age to take benefits, you won't face a reduction in your monthly payments. And you also won't be subject to an earnings-test limit if you choose to hold down a job.

But if you work and collect Social Security before reaching full retirement age, you'll risk having some of your benefits withheld if your income exceeds a certain threshold. In 2025, that threshold, known as the earnings-test limit, is $23,400, up from $22,320.

Making matters a bit more confusing, though, is that there's a separate earnings-test limit for seniors who start off the year without having reached full retirement age, but who then reach full retirement age before the end of the calendar year. In that case, the earnings-test limit is $62,160, up from $59,520 in 2024.

3. Higher earners are looking at a larger Social Security tax bill

Social Security is funded primarily by payroll taxes. And the more you earn, the more you pay in, up to a certain point.

Social Security sets a wage cap each year that determines how much income is taxed for funding purposes. In 2025, that cap is $176,100, up from $168,600 in 2024.

The good news is that this change won't impact most working Americans. But for the small percentage whose paychecks are high enough to feel the difference, this is clearly an unwanted update to the program.

That said, if you're unhappy to see your Social Security tax bill go up, remember that things could be worse. There could one day come a point when Social Security's wage cap is eliminated completely, thereby subjecting all earnings to taxes to fund the program.

So for now, you may want to be grateful for the fact that you're only looking at another $7,500 worth of wages that are subject to Social Security taxes. At the Social Security tax rate of 12.4%, that's an additional $930 you're looking at in 2025. And if you're a salaried worker, you get to split that extra $930 down the middle with your employer, reducing the extra amount of money you're losing.

Plus, think about it this way. The more you pay into Social Security, the higher a monthly benefit you get.

You can save well for retirement but accidentally blow your nest egg and wind up cash-strapped. So the more guaranteed income you have in the form of a larger monthly benefit, the more protection you enjoy.

It's easy to forget about details like these when much of the buzz around Social Security is the possibility of benefit cuts. But it's important to stay aware of Social Security changes so you're not caught off guard.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.