Social Security serves as a key source of income for millions of retired Americans today. But even though the program has been around for many decades, it tends to undergo changes from year to year. And some of those changes are positive ones in nature that can improve retirees’ finances.
In 2025, Social Security is expected to undergo two important shifts that may result in more financial breathing room for you. Here’s what to expect come January.
1. A higher monthly benefit
Each year, Social Security benefits are eligible for a cost-of-living adjustment (COLA). The purpose of COLAs is to help ensure that seniors are able to maintain their buying power as inflation drives prices up over time.
In 2024, Social Security recipients saw their benefits rise by 3.2%. But inflation has cooled to a large degree in 2024, compared to 2023. Because of this, 2025’s Social Security COLA isn’t expected to be as large as 2024’s.
We won’t know exactly what 2025’s Social Security COLA will look like until Oct. 10. That’s because that number is based specifically on third-quarter inflation readings. Since the month of September isn’t over, it’s too soon to have that data.
Recent estimates, however, are putting 2025’s COLA at 2.5%. While that number could change slightly (either upward or downward), at this point, it’s fair to assume that Social Security benefits will rise to some degree in the new year.
Keep in mind that even though Social Security benefits are eligible for an annual COLA, those monthly payments could stay flat if there’s no uptick in inflation. But that’s unlikely to be the case in 2025, which means you should expect some sort of increase to your monthly checks.
If you’re disappointed by that initial 2.5% estimate, realize that what you’ll lose in the form of a smaller COLA, you’ll gain in the form of less rampant inflation.
2. A higher earnings-test limit
Seniors who receive Social Security benefits are allowed to earn money from a job at the same time. Once you reach full retirement age, you can earn any amount of wages without having that money negatively impact your Social Security payments.
However, if you’re working and collecting Social Security prior to full retirement age, you’re subject to an earnings-test limit. Exceeding that limit generally results in having some of your benefits withheld.
This year, the earnings-test limits are $22,320 for those not reaching full retirement in 2024 and $59,520 for those who are reaching full retirement age in 2024. In 2025, these limits are likely to increase in line with inflation. But as is the case with next year’s COLA, we won’t have an official number until Oct. 10.
Gear up for positive news
If you rely on Social Security to make ends meet, know that things are likely to improve in 2025. Not only should your monthly payments rise, but you should have the option to earn more money in the new year without risking the withholding of benefits. It pays to check the Social Security Administration’s website on Oct. 10 to learn more about the positive changes coming down the pike.
