Social Security Makes Changes for 2025—What You Need to Know

A Social Security card atop checks from the U.S. Treasury in Washington on Oct. 14, 2021. Kevin Dietsch/Getty Images

The Social Security Administration (SSA) recently announced that millions of Americans’ Social Security benefits and supplemental security income payments will increase by 2.5 percent in 2025.

Beginning in January, the cost-of-living adjustment (COLA) will boost monthly benefits by about $50 on average. The federal government estimates that the average monthly Social Security benefit for retired workers will be $1,976 next year.

In addition to the COLA announcement, the SSA outlined a series of changes to the retirement program for the upcoming year.

Changes to Benefits

The SSA also made inflation adjustments for other beneficiaries.

The maximum Social Security monthly benefit for a worker retiring at the full retirement age of 67 will be $4,108 in 2025, up from $3,822 in 2024.

In January, the estimated average monthly benefit for a widowed mother and two children will rise to $3,761, up from $3,669. And the estimated average monthly benefit for an “aged” widow or widower alone will increase to $1,832, up from $1,788.

The monthly cap for those receiving Social Security Disability Insurance benefits will rise to $1,620 from $1,550.

The estimated average monthly Social Security benefit for disabled workers will increase to $1,580, up from $1,542. The monthly benefit cap for blind workers will rise to $2,700 from $2,590.

The estimated average monthly benefit for a disabled spouse and worker with one or more children will increase to $2,826 from $2,757.

Individuals waiting to collect Social Security past the full retirement age garner delayed retirement credits, which allow them to claim more. Workers retiring at age 70 can collect a maximum monthly payment of $5,108, up from $4,873.

Mixed Reactions

The Senior Citizens League called 2025’s COLA “disappointing” and “another lost opportunity to grant seniors the financial relief they deserve.”

Shannon Benton, the league’s executive director, recommended changing the COLA calculation by implementing an index that reflects seniors’ evolving costs.

Under the current COLA formula, the SSA relies on the consumer price index for urban wage earners and clerical workers (CPI-W), which tracks price changes in goods and services. This demographic represents about one-third of the U.S. population.

Benton suggests calculating COLA using the consumer price index for the elderly (CPI-E). This measurement closely tracks expenses more likely to be incurred by the older population, such as prescription drugs.

“This year represents another lost opportunity to grant seniors the financial relief they deserve by changing the COLA calculation from the CPI-W to the CPI-E, which would better reflect seniors’ changing expenses,” Benton said in a statement.

A woman looks on as men play dominoes in Miami on May 17, 2022. Chandan Khanna/AFP via Getty Images

“Seniors—and [The Senior Citizens League]—demand that Congress takes immediate action to strengthen COLAs to ensure Americans can retire with dignity, such as instituting a minimum COLA of 3 percent and changing the COLA calculation from the CPI-W to the CPI-E.”

For many older Americans, the 2025 increase might feel small compared with the expenses they experience in their everyday lives.

But it can make a difference for many recipients, AARP CEO Jo Ann Jenkins said.

“This adjustment means older Americans will receive needed relief to help better afford essential items from groceries to gas,” Jenkins said in a statement. “We know many older Americans who rely on Social Security may find it hard to pay their bills. Social Security is the primary source of income for 40 percent of older Americans.”

Higher Earnings Thresholds in 2025

The Social Security tax rate is 6.2 percent—12.4 percent for the self-employed—on incomes up to $168,600, which employers match. In 2025, the maximum taxable earnings will rise to $176,100.

To qualify for Social Security benefits, individuals must earn a minimum of 40 credits over their working lives. A maximum of four credits can be earned per year. Next year, the requirement for one credit will be $1,810 in earnings, up from $1,730 in 2024.

Adjustments also will be made to the benefits of Social Security recipients who work while collecting benefits. Before hitting full retirement age, recipients can earn up to $23,400 annually without losing any of their benefits in 2025, up from $22,320 in 2024, with $1 deducted from benefit payments for every $2 of earnings that exceeds that limit.

Workers prepare to lift a new pedestrian bridge into place in Stamford, Conn., on Aug. 26, 2023. John Moore/Getty Images

Those who have reached the full retirement age and are still employed can earn $62,160 annually without losing any of their benefits in 2025, up from $59,250 in 2024. For the year in which the retiree reaches full retirement age, his or her benefits will be reduced by $1 for every $3 earned over the limit in the months before reaching the full retirement age. For this purpose, earnings are counted only up to the month before a retiree reaches full retirement age.

“If you are younger than full retirement age at any time in 2025, there is a limit to how much you can earn before we reduce your benefits,” the SSA said in the announcement. “If you are working or planning to work, we usually ask you to estimate your earnings for the year. If you do not report your estimated earnings and get paid too much, you may have to repay benefits received.”

Beginning with the month that retirees reach full retirement age, their earnings no longer reduce their benefits, regardless of how much they earn.

Social Security Funding

Social Security and Medicare are wrestling with long-term funding issues.

The Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund, combined to establish the OASDI and determine Social Security’s health, estimate that 100 percent of total scheduled benefits will be paid out until 2035.

After 2035, the fund’s reserves will be exhausted, and benefits will be automatically slashed by 17 percent.

The OASI Trust Fund expects to pay 100 percent of scheduled benefits until 2033. After that year, the fund’s reserves will be depleted, and benefits will be cut by 21 percent.

The DI Trust Fund is projected to cover 100 percent of benefits for the next 74 years.

According to the 2024 OASDI trustees report, Social Security has $63 trillion in long-term unfunded liabilities.

The annual report broke down the funding gap into two parts: money permanently missing and money missing over the next 75 years. For the former, there is an indefinite $62.8 trillion shortfall. For the latter, there is a $23 trillion deficit.

“The annual shortfalls after trust fund reserve depletion rise slowly and reflect increases in life expectancy,” the report states. “The summarized shortfalls over the infinite horizon, as percentages of taxable payroll and GDP, are larger than the shortfalls for the 75-year period.”

A Social Security Administration office in Waycross, Ga., on Aug. 28, 2024. Madalina Vasiliu/The Epoch Times

Over the years, many proposals have been presented to financially protect these programs.

OASDI trustees suggested raising the payroll tax rate to about 17 percent or implementing a “permanent reduction in benefits for all current and future beneficiaries by about 26.5 percent” to address these funding shortfalls.

Another suggestion has been to raise the full retirement age from 67 to 69.

The Congressional Budget Office (CBO) says this policy decision would reduce Social Security spending and the program’s 75-year actuarial deficit. However, “such an increase would not change CBO’s projection that the balance of Social Security’s OASI and DI trust funds, were they combined, would be exhausted in fiscal year 2034,” the nonpartisan budget watchdog said in September.

Naveen Athrappully contributed to this report.