Get ready for 3 surprising Social Security changes in 2025

Social Security is often in the news, given the program’s financial instability and potential cuts to benefits. And every time there is an election, Social Security tends to be a big issue for politicians.

Because of this, you may have inadvertently missed some of the changes announced for Social Security in 2025. But whether you’re retired and already receiving benefits or still receiving them, here are three things you need to know. of your career.

1. Benefits are increasing by 2.5%

Social Security is scheduled to undergo cost-of-living adjustments in 2025. That’s good news.

But the bad news is that benefits only increased by 2.5% in January. This is much smaller than the 3.2% increase beneficiaries received in early 2024.

Unfortunately, the bad news doesn’t end there. It was recently announced that the cost of Medicare Part B will increase by $10.30 per month in 2025.

Without taking that into account, a 2.5% COLA would increase your Social Security by an average of $49 per month. However, since many Social Security recipients also have Medicare, the increase in Part B premiums would be limited to about $39.

2. You have more room to earn money at work while receiving benefits.

There are several benefits to waiting until you reach full retirement age to claim Social Security. If you were born after 1960, your age is 67 years.

If you postpone receiving benefits until you reach retirement age, your monthly payments will not be reduced. Additionally, if you choose to continue working, you will not be subject to means-tested restrictions.

But if you work and receive Social Security before you reach full retirement age, you risk having some of your benefits withheld if your income exceeds a certain threshold. In 2025, that threshold, known as the earnings test limit, will be $22,320 to $23,400.

However, to further complicate matters, seniors who begin the year less than full retirement age and reach full retirement age before the end of the calendar year have separate means-testing limitations. . In this case, the earnings test cap would be $62,160, up from $59,520 in 2024.

3. High-income earners are considering higher social security taxes

Social Security is primarily funded by payroll taxes. And up to a certain point, the more you earn, the more you pay.

Social Security sets a wage cap each year that determines the amount of income that is taxed to fund it. The 2025 cap will be $176,100, up from $168,600 in 2024.

The good news is that this change will not affect most working Americans. But for the few people whose salaries are high enough to see a difference, this is clearly an undesirable update to the program.

That said, if you’re frustrated by seeing your Social Security tax bill go up, remember that things could get much worse. One day, Social Security’s wage cap may be completely eliminated so that all income is taxed to fund the program.

So for now, you might as well appreciate the fact that you’re only considering an additional $7,500 worth of wages that are subject to Social Security taxes. At a Social Security tax rate of 12.4%, that would mean an additional $930 in 2025. And if you’re a salaried employee, you’ll split that extra $930 between you and your employer, reducing your additional tax bill. The money you are losing.

Furthermore, think about it this way. The more you pay into Social Security, the higher the benefits you receive each month.

Even if you have enough saved for retirement, you may accidentally blow your nest egg and find yourself cash strapped. Therefore, the more guaranteed income you have in the form of monthly benefits, the more protection you will enjoy.

It’s easy to forget details like this because so much of the conversation about Social Security is about potential benefit cuts. However, it’s important to stay aware of changes to Social Security so you don’t get caught by surprise.