2025 Social Security Updates: Key Changes for Workers and Retirees

The beginning of each year often brings significant changes as many individuals update their employment or healthcare plans and set personal resolutions. Concurrently, they must adjust to modifications in governmental policies regarding taxes, retirement funds, and Social Security. This year, there are several key updates to Social Security that are particularly critical for both retirees and current workers to note.

Amongst these updates, here are five major changes to Social Security that you should be aware of:

1. 2.5% Increase in Cost-of-Living Adjustment (COLA)

The Social Security Administration has implemented a 2.5% cost-of-living adjustment (COLA) starting with the December 2024 benefits. However, since Social Security payments are disbursed the month after they are due, the increased benefits will begin to appear in checks distributed this month.

The specific date you receive your January benefit depends on your birth date:

• Born from the 1st to the 10th: January 8, 2025
• Born from the 11th to the 20th: January 15, 2025
• Born from the 21st to the end of the month: January 22, 2025

For those also receiving Supplemental Security Income (SSI), the first increased payment should have been received on December 31, 2024. These payments are typically issued on the first of the month unless it falls on a weekend or holiday, as it did with New Year’s Day.

2. Increased Earnings Needed for Social Security Work Credits

For 2025, earning Social Security work credits will require slightly higher wages. These credits are crucial for qualifying for retirement benefits, with a minimum of 40 needed, though you can only accrue up to four per year.

Last year, each credit required earnings of $1,730, but this threshold has risen to $1,810 for 2025. Despite this increase, the amount remains attainable for most workers, including those in part-time positions, as they only need to earn $7,240 over the year to receive all four possible credits.

3. Increased Maximum Taxable Earnings for Social Security

The maximum amount of earnings subject to Social Security payroll taxes has also increased. In 2024, earnings up to $168,600 were taxable, but this cap has been raised to $176,100 for 2025.

While this change primarily affects those with higher incomes, it could mean an additional $465 in taxes for traditionally employed individuals and $930 for those who are self-employed.

4. Raised Earnings Test Exemption Limits

If you are receiving Social Security benefits before reaching full retirement age (FRA) and are still working, you can earn more in 2025 before any benefits are withheld. There are no withholding requirements for those who have reached their FRA.

In 2024, beneficiaries under their FRA all year lost $1 for every $2 earned above $22,320. For those reaching their FRA in 2024, the deduction was $1 for every $3 earned over $59,520 before their birthday. For 2025, these limits have increased to $23,400 and $62,160, respectively.

5. Increment in Full Retirement Age for Those Born in 1959

For individuals born in 1959, the full retirement age (FRA) has been adjusted to 66 years and 10 months. This adjustment is part of a gradual increase that will culminate next year when the FRA sets at 67 years for those born in 1960 and later.

While early claims can be made starting at age 62, doing so may reduce your benefits by up to 30%. It’s crucial to consider all your options before claiming early, particularly if you don’t face urgent health or financial issues.

These adjustments to Social Security are specific to 2025 but reflect typical annual changes. Keeping these updates in mind is important for anyone who is currently working or already receiving Social Security benefits, as similar changes can be expected in future years.

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