The Social Security Administration (SSA) makes changes to Social Security programs every October that go into effect the following January. The biggest changes tend to concern Cost of Living Adjustments (COLA), which ensure that retirement, disability and survivors’ benefits keep pace with increases in the cost of living. Calculating your benefits amidst these regular changes can sometimes be challenging.
A financial advisor can help you create a financial plan to keep up with inflation and pay for your retirement needs and goals.
Increased Payment to Beneficiaries
Social Security announced a 2.5% hike in its COLA for 2025, an increase that started being paid in January 2025. The COLA increase is calculated by the Bureau of Labor Statistics (BLS) based on consumer price data to neutralize the effects of inflation.
The 2.5% increase for 2025 means different things depending on what type of Social Security support the beneficiary was receiving.
| Retired Workers | For the average retiree, the 2.5% increase will raise the average monthly benefit amount to $1,827 for 2025. Some retirees have Medicare premiums taken directly from their checks, so they may not see the full amount. |
| Retired Worker and Aged Spouse | For a senior couple in which both spouses are receiving benefits, the average total benefit amount will be $2,900. |
| Widow With Two Children | A widow with 2+ children will receive an average benefit of $3,698 in 2025. |
| Surviving Spouse | A surviving spouse with no children will receive an average benefit of $1,792. |
| Disabled Workers | On average, disabled workers will receive $2,748. |
| Disabled Worker + Spouse + Children | A disabled worker with a spouse and one or more children will receive an average benefit of $1,558. |
Increased Maximum Taxable Earnings
Social Security is mainly funded by a payroll tax that is paid by workers and employers. Employees have 7.65% of their paycheck withheld to go toward Social Security, and employers match that amount. Those who are self-employed must pay the full 15.30%.
However, the tax only applies to income up to a certain maximum amount. This number, called the Social Security wage base, often rises each year with inflation. The maximum taxable earnings for 2023 will be $176,100. The tax rate will be 6.2%. This means that someone who makes $180,000 per year will only have to pay the 6.2% tax on the first $176,100 of their earnings.
Increased Full Retirement Age
Full retirement age is the age at which Social Security benefits may be collected at their full amount. Full retirement age has been increasing since 1938 as life expectancy has continued to increase. The earliest that Social Security can be collected is at age 62. However, full retirement age is 67, and if you start claiming earlier than that, your benefits will be permanently reduced.
Beneficiaries have the option to delay collecting Social Security beyond their full retirement age. Each year that collection is delayed, the benefits increase until you hit age 70. This is the latest that someone can claim retirement benefits and the age at which those benefits max out. The upside of waiting to collect is that the payout each year will be greater, but you will collect for fewer years.
Social Security also gives beneficiaries the option to cancel benefits within 12 months of filing for them. The beneficiary will have to repay any money that has already been claimed by himself, a spouse or children. The beneficiary can then file later to claim his full benefits. If a beneficiary withdraws a claim, he will not be able to withdraw any future claim.
Increased Earnings Limits
If you file for Social Security benefits while still working and you haven’t yet reached full retirement age, there is a limit to how much you can earn before some or all of your benefits will be withheld.
If you’re younger than full retirement age in 2025, Social Security will deduct $1 from your benefits for each $2 you earn above $23,400. If you reach full retirement age during 2025, Social Security will deduct $1 from your benefits for each $3 you earn above $62,120 until the month you reach full retirement age.
Social Security Disability Earnings Limit Increase
The SSA offers disability benefits through Social Security Disability (SSDI) and Supplemental Security Income (SSI) programs. There are several disabilities, including physical and mental conditions and illnesses, that make someone eligible for disability benefits. You can usually claim the benefits when something prevents you from working for at least a year. If you are able to start working again, benefits will stop.
However, the SSA takes into account that some people with disabilities may be able to do some work. In these cases, there is a limit to how much you can earn per month before benefits are no longer offered. As of 2025, those who are legally blind may receive a maximum of $2,700.
Social Security Credits Require More Earnings
To be eligible to receive Social Security, you must pay Social Security taxes and earn 40 credits; you typically earn one credit per quarter, provided you earn a minimum amount of money in that quarter. In 2025, one credit is equal to $1,810.
COLA Notices Posted Online
Social Security recipients can view their Cost of Living Adjustments through their mySocialSecurity account. These changes are mailed each year, but going forward, recipients will be able to choose how they receive this notice. The benefit of viewing the notice online is that adjustments can be seen more often, as opposed to once a year by mail.
Bottom Line
One of the most notable changes is the anticipated increase in the cost-of-living adjustment (COLA), which aims to better align benefits with inflation, ensuring that recipients maintain their purchasing power in the face of rising costs. Staying informed about these developments will empower individuals to optimize their Social Security benefits and secure a more stable financial future. As these changes unfold, keeping abreast of updates will be essential for navigating the evolving landscape of Social Security.
Tips for Navigating Social Security
- A financial advisor can be helpful when building a retirement income plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- As you plan for retirement, make sure you’re accounting for every potential source of income, including Social Security. Calculating your benefit amount and reviewing strategies around timing and spousal benefits are just some things to start thinking about.
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