The year 2024 is rapidly concluding, and several modifications and alterations will be implemented in the realm of Social Security in the upcoming year. Some apply to retirees who currently receive Social Security, while others apply to individuals who are still employed or who will soon begin receiving benefits. The majority of them are tied to inflation. Here are five Social Security changes you should be aware of in 2025 so you don’t miss anything.
1. A new cost of living adjustment (COLA) increase will impact monthly checks
The cost-of-living adjustment, also known as COLA, for Social Security recipients was set at 2.5%, and it will become effective with the January 2025 payments.
According to the most recent data from October, the average monthly Social Security benefit for a retired worker was $1,925.46, which means that the average will be approximately $1,974 after the COLA takes effect.
It is important to highlight that the COLA boost is provided every year so beneficiaries can keep pace with inflation and have enough money to cover their living expenses.
2. The Social Security benefit formula will change in less than 2 weeks
The bend points used by the federal agency will shift, but the formula for Social Security benefits itself won’t be changed.
In essence, there are three multipliers used in the Social Security calculation: 90 percent, 32 percent, and 15 percent. Your monthly average wages are then put into a formula that averages your 35 highest-earning years, which has been adjusted for inflation.
The amount of money that these percentages apply to, referred to as the bend points, varies annually, but they remain constant.
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The formula used to calculate average indexed monthly earnings (AIME) for individuals who first qualify in 2025 is:
- 90 percent of the first $1,226.
- 32% of the total between $1,226 and $7,391.
- 15% of any AIME over $7,391.
3. Maximum monthly checks could reach up to $4,995
As a result of inflationary adjustments, the maximum allowable Social Security payout is rising. In 2025, someone retiring at their full Social Security retirement age will get the maximum monthly benefit of $3,918, and if they decide to delay benefits until 70, they could receive up to $4,995.
However, because most persons do not begin collecting Social Security at their precise full retirement age, consider the following:
- The maximum monthly compensation for someone retiring at 62 in 2025 will be $2,778.
- The maximum monthly benefit at age 70 will be $4,995.
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4. Social Security contribution and benefit base will also change
This adjustment affects both those who are currently employed and those who will soon begin receiving monthly benefits, as the contribution and benefit base will increase from $168,600 to $176,100 in 2025.
This amount is frequently called the “taxable maximum earnings,” as only this amount is subject to the 6.2% Social Security tax that employers and employees must pay.
It is the maximum amount of money that can be utilized to calculate AIME, which I covered in the formula part before, but it also has to do with the benefit calculation.
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5. The maximum amount you can make while receiving Social Security benefits
Finally, the restrictions on the current earnings test limits will change in less than two weeks. For those who are unfamiliar, there is a maximum amount of earned income you can have while still receiving Social Security benefits if you have not yet reached full retirement age.
In addition, the earnings test has two parts:
- You can receive up to $1,950 in monthly earnings as an exemption if you reach full retirement age after 2025. Above that amount, $1 in benefits is withheld for every $2 in excess earned income.
- You can receive a $1 withholding for every $3 earned over $5,180 per month if you reach full retirement age in 2025.
It’s important to remember that any money withheld under the earnings test will increase your benefit once you reach full retirement age, so it’s not just lost.