3 Social Security Changes Retirees Need to Know About in 2025

Without Social Security, millions of Americans would be living below the poverty line. With it, many don't -- even though the average monthly retirement benefit of $1,975 (as of December) is not all that huge. It works out to about $23,700 annually.

Fortunately, Social Security does undergo some changes from year to year, including nearly annual increases in benefits. There are also some things you can do to make your future benefits bigger. Let's dive in.

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1. The COLA for 2025 is making benefit checks bigger

The cost-of-living adjustment (COLA) for 2025 is indeed a most notable change in Social Security for 2025, but it's not an Earth-shattering one. The COLA, effective in December 2024, is just 2.5%. So if you were collecting, say, $2,000 per month, you'd now be getting $2,050.

But remember that the nearly annual COLAs are meant to help retirees keep up with inflation, so a low increase reflects relatively low inflation. Here are some recent years' COLAs, some of which arrived after much higher inflationary periods:

Data source: Social Security Administration.

Still, a 2.5% increase will certainly disappoint a lot of people. In fact, a recent Motley Fool survey found 54% of retirees view the COLA as inadequate.

2. Higher earners will have to fork over more to Social Security

Here's something many people don't realize. You're probably taxed on all your wages for Social Security -- there's a 6.2% deduction on your paystub and it's matched by another 6.2% coming from your employer. (Self-employed people have to pay the full 12.4%.) But high earners are only taxed on part of their wages. The threshold was $168,600 last year and for 2025 it's $176,100.

So someone earning, say, $3,176,100 will only be taxed on $176,100 of earnings for Social Security and not at all on the other $3 million in earnings. If you think this is unfair, you're not alone. With Social Security due to face a funding shortfall within a decade or so, it's been suggested that this earnings cap be raised a lot -- or just eliminated. That's one effective way to strengthen Social Security.

3. The retirement earnings test has higher thresholds

Here's a quick refresher: You can claim your benefits as early as age 62, or at your "full retirement age" (FRA), which is 66 or 67 for most people today. Claiming early results in more, but smaller checks. Those delaying starting to collect checks will see them increase by about 8% for each year beyond their full retirement, until age 70. For most people, waiting until age 70 will be the best move -- if you can swing it. Many people simply can't, as they need that income as soon as possible.

If you claim your benefits early and you keep working to some degree, you'll want to know about the retirement earnings test. Earn more than a certain threshold, and your benefits will be reduced. It's not as bad as it seems, though, because any money withheld is factored into your benefits once you reach your FRA and your future benefits will increase accordingly. So you don't really lose out on any Social Security benefits -- you just receive some later.

Here are the details:

Data source: Social Security Administration.

These are three of the most important Social Security changes for 2025. It's smart to keep up with Social Security developments, as it may help you in your retirement planning. Also, the new administration in Washington hasn't committed to not touching or changing Social Security. So do keep an eye on things and let your representatives know your feelings, too.

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