Because it has been around for so long, Social Security can seem like an unchanging program. While the main goal of the program, which is to provide benefits to retirees, has stayed the same, the details of the program have changed over the years and will continue to do so. What changes are going to happen in 2025?
Social Security benefits are rising by 2.5%
A cost-of-living adjustment (COLA) is added to Social Security benefits every year to help them keep up with inflation. This isn’t meant to raise the payments that beneficiaries get; it’s just meant to help them keep their purchasing power. The same will happen in 2025; benefits will go up by 2.5%.
As bad as inflation has been in 2024, this may seem like a small increase. But lower inflation is better for everyone because it means less money going to the government.
Social Security’s earnings-test limit is increasing
Many people think that getting benefits and working can’t go together, but there are some extra rules and layers that need to be thought through. If you work and get benefits before you reach full retirement age, you will have $1 taken out of your Social Security for every $2 you earn over a certain limit, which in 2025 is $23,400.
This limit goes up to $62,160 the year you turn 65 (in 2025), and the benefits you don’t get will go down by $1 for every $3 you earn above that amount. Once you reach full retirement age, you can make as much money as you want. The benefits that were withheld are not lost forever; they are added back to your benefits when you reach full retirement age.
Social Security’s wage cap is rising
Depending on how much money you make, you might not have to pay taxes on your whole salary to go into the program. Because Social Security isn’t a model that can be expanded forever, there is a cap on the amount of money that can be put into it.
That limit has gone up from $168,600 in 2024 to $176,100 in real money in 2025. Since you make $200,000 a year, you won’t have to pay taxes on the last $23,900 of your income.
For years, this level of contribution has been seen as unfair, since the people who give the most to the program are likely the ones who could live off of their salaries alone.
It doesn’t make sense for millionaires to pay the same amount into the system as average working class people, since they will never need benefits. People have tried to change this and tax all income, but so far no plan has been approved.
Social Security’s work credits will have a higher earnings threshold
Not everyone automatically gets Social Security. People who have worked for a few years might not get it if they haven’t earned the minimum number of credits. To be eligible for the program, a person must have earned at least 40 work credits, with no more than four credits per year.
To get these credits, you have to earn at least a certain amount of money. In 2025, one work credit is worth $1,810, which means that your wages are at least $7,240 a year.
When you work full-time, this number is easy to reach. But when you work part-time or as a freelancer, it might be harder to make sure you meet these minimum earnings. Keep in mind that these minimum wages won’t give anyone enough benefits to live comfortably in retirement.
If you can, try to work longer, at least 35 years, to give yourself a better chance of a good retirement. Your benefits will go down if you don’t work for a year. This is because Social Security will count that year as a “die” year.
