One thing people quickly notice about Social Security is that change is virtually inevitable. Rules change, eligibility requirements change, payments change, and there’s no reason to believe this will stop anytime soon — if ever.
Some Social Security changes only apply to certain groups of people, but others apply to most current or incoming recipients.
Regarding the latter, there are two major changes to be aware of as we head into 2025. Even if you’re not currently a benefit recipient, they’re worth knowing about because they could still be relevant to your future retirement plans.
1. Monthly benefits will be higher in 2025
The most notable change to Social Security benefits in 2025 should be good news. All current recipients will receive a boost to their monthly benefit thanks to the Social Security cost-of-living adjustment (COLA).
The annual COLA is meant to offset the effects of inflation. Whether it’s food, clothing, or housing, it seems that the prices of most goods and services are steadily increasing. And it’s even more impactful for those on fixed-income sources like Social Security.
Luckily, recipients can expect a 2.5% increase in their monthly benefits beginning in January 2025.
A 2.5% increase is below the average COLA since it became annual in 1975, but it could also be worse. There have been a few instances when benefits remained the same, but that’s more of an anomaly than the norm. Below are the past 10 COLAs:
| Year | COLA |
|---|---|
| 2015 | 1.7% |
| 2016 | 0% |
| 2017 | 0.3% |
| 2018 | 2% |
| 2019 | 2.8% |
| 2020 | 1.6% |
| 2021 | 1.3% |
| 2022 | 5.9% |
| 2023 | 8.7% |
| 2024 | 3.2% |
Source: Social Security Administration.
Social Security uses inflation data from July, August, and September of the previous year to determine the upcoming year’s COLA. So, while the 2.5% COLA seems modest, it also means that inflation hasn’t been as high as in recent years. I’m sure many retirees don’t mind making this trade-off.
2. More income will be subject to Social Security taxes in 2025
Most U.S. workers spend their careers paying Social Security payroll taxes. If you have an employer, both of you split the 12.4% Social Security tax, paying 6.2% each. If you’re self-employed, you’re responsible for paying the full 12.4%.
The (kinda) good news is that not all income of some workers might be subject to Social Security payroll taxes — only up to a certain amount, called the wage base limit.
The new wage base limit, which will be in effect in 2025, is $176,100, up from the $168,600 limit in 2024. This means more income of some workers will be subject to Social Security payroll taxes.
For example, if you earned $175,000 in 2024, $6,400 would be exempt from Social Security payroll taxes. However, if you earn $175,000 in 2025, all of it will be subject to taxes because it’s below the new wage base limit.
Below are the past 10 wage base limits:
| Year | Wage Base Limit |
|---|---|
| 2015 | $118,500 |
| 2016 | $118,500 |
| 2017 | $127,200 |
| 2018 | $128,400 |
| 2019 | $132,900 |
| 2020 | $137,700 |
| 2021 | $142,800 |
| 2022 | $147,000 |
| 2023 | $160,200 |
| 2024 | $168,600 |
Source: Social Security Administration.
Aside from the tax implications, knowing the annual wage base limit is important for people aiming to receive the maximum possible monthly benefit ($5,108 in 2025). To be eligible for the maximum benefit, you must delay claiming until 70 (the latest age that benefits increase by delaying), and you must have earned above the wage base limit in the 35 years that Social Security uses to calculate your monthly benefit.
Wage base limits don’t directly impact current Social Security recipients, but it’s still worth being informed of annual changes, since they can give you an idea of the program’s health and direction.
