Changing Social Security Benefits in 2025 and How They Will Affect Retirement Income

Life is full of negative and positive experiences that may affect us. While change is part of the ordinary aspects of living for some, others may find it hard to cope. Social Security, the federal agency administering millions of payments to recipients of retirement, survivor, disability and SSI benefits changes as the people’s lives do.

Change, however, may not always mean doom and gloom — next year, it might even tilt the scale in Social Security’s favor. If you’re now eligible for benefits upon retirement, find out more about what’s in store in 2025 and how this affects your earnings as a retiree.

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Normally, Social Security payouts are accompanied by an annual cost-of-living adjustment designed to keep retirees on spending pace as life grows more expensive. There is no guarantee, however, that there will be a COLA in any given year. For a COLA to happen, there would need to be some year-to-year inflation.

Fortunately, most of 2022 saw very high inflation. By 2024, however, increases in the cost of living have flattened on an annual basis. That may be a harbinger of more spikes up in Social Security benefits for 2025.

The size of that spike remains to be seen, however, since each January COLA is tied to inflation data from the previous third quarter.

According to a new forecast from nonpartisan Senior Citizens League, the Social Security COLA will be 2.57% in 2025. Though smaller than the 3.2 percent increase beneficiaries saw at the beginning of 2024, it is still a benefit.

Maximum payment

Not all employees pay Social Security taxes on their entire wage; so, for every dollar they earn above a periodically adjusted wage tax cap, higher earners don’t contribute to the program at all. The other side of the coin is that there is a maximum monthly Social Security payment.

The maximum monthly benefit at full retirement age will be $3,822 in 2024. Delayed payments will result in $4,873.

It is important to point out that individuals need to meet the full retirement age, work history, and Social Security contribution requirements to qualify for a maximum month amount. For the retired workers to receive the $4,873 benefit, at the pay-ins, they should have paid according to the maximum taxable earnings.

Besides the maximum monthly payouts, retirees can receive $2,710 as soon as they claim their benefits prior to their full retirement age and $1,900 on average.

Earnings Test Limit: The most pervasive myth regarding the claiming of Social Security is that if you are working and collecting benefits at the same time, then you are not allowed to make too much money. While somewhat true, it’s not entirely accurate. You can do both, but if you work while collecting benefits, you could end up having part of your benefits withheld if you earn more than what’s called the earnings test limit.

If you will reach your full retirement age this calendar year, but you have not yet reached your full retirement age, then this year, the earnings test maximum is $22,320 ($59,520).

These are likely to increase in the upcoming year, so it will be easier to make more money without losing some of your Social Security benefits because of it. To make this point clear, you don’t lose the percentage of your benefits that get withheld because you have exceeded the earnings-test limit.

This money will automatically be deposited into your monthly fundamental every time you hit the retirement age. Also, do remember that change can be either useful or n=bad depending upon the situation.
 

FAQs

What do you mean by ‘COLA’?

COLA is the short form for Cost of Living Adjustment. This means it is an increase of benefits annually depending on inflation in Social Security.

How do they calculate COLA?

The COLA is set by third-quarter inflation measures from the Consumer Price Index for Urban Wage Earners and Clerical Workers.

How much of a COLA increase is estimated for 2025?

The nonpartisan Senior Citizens League projects a 2.57 percent gain.

What is the highest possible monthly Social Security benefit?

In 2024, it is $1,822 at full retirement age, $2,373 if benefits are delayed.

Can I keep working while drawing on Social Security?

Yes, but if you are below the full retirement age, payments may be withheld if your earnings are more than the test level.