What Changes Are Coming To Social Security In 2025?

Several aspects of Social Security changed in January, including credits and taxes, check amounts, and retirement ages. As you plan for 2025, you can identify any adjustments you can make in order to maximize your eligibility for the largest benefits by knowing the changes to Social Security in 2025.

In 2025, one thing to watch out for is the actions taken by the incoming Trump administration regarding Social Security, if any. These changes would have happened regardless of the outcome of the election in 2024.

There are concerns about tariffs’ impact on Social Security and Medicare funding, and Donald Trump’s stances on Social Security and Medicare indicate some aspects of the programs may change in the future. The rest will be for you in 2026. Currently, these are the most important changes to be aware of.

The 6.2% Social Security tax does not only affect retirees. Current workers should keep an eye on accumulating enough Social Security credits.

What changes are coming to social security in 2025? Here Are All Details

When you stay informed, you avoid unexpected surprises and keep your financial goals on track. Staying informed helps you avoid unexpected surprises like checking the weather before embarking on a big trip. Knowing these new SSA changes will allow you to plan ahead and manage your finances with confidence. Here’s what’s changing and how it may affect your business or you:

1. Current retirees’ Cost-of-Living Adjustment (COLA): 

If you’re receiving Social Security benefits, you’re in luck: in 2025, you’ll get a 2.5% COLA. With the beginning of payments in January 2025, retirees will receive on average $50 more in benefits per month.

This adjustment is designed to help retirees maintain their purchasing power in the face of inflation. For many on fixed incomes, the 2.5% increase offers some relief, despite being slightly less than the 2.6% average COLA over the past decade.

Although COLAs don’t occur every year, they’re an important safeguard that helps beneficiaries keep up with rising costs. The Social Security Administration adjusts retiree benefits based on the Consumer Price Index (CPI).

Also check: How To Change Address With Social Security?

2. An increase in the Social Security tax cap for high earners: 

It is also being announced that the SSA will raise the maximum amount of income subject to Social Security taxes for those still working, particularly higher earners. It is estimated that in 2025, the maximum taxable income will be $176,100, up from $168,600 in 2024.

The current Social Security tax rate for both employers and employees is 6.2%. This means that if you earn at least $176,100 in 2025, you will each pay an additional $465 in Social Security taxes.

When you retire, you may receive higher Social Security benefits if you’re credited for a higher income level, which could increase your taxes.

3. A full retirement age (FRA) of 65 in 2025

As the retirement age increases gradually for retirees born between 1955 and 1960, the full retirement age will reach 67 in 2025.

FRA in 2025 is 66 years and 10 months. For those who reached 66 in 2024, it is 66 years and 8 months.

Your FRA will be reached by the following age, based on your birth year:

• A 1958 baby is 66 and six months old when they reach their FRA in 2024, if they were born in 1958.
• In 2025, if you were born in 1959, you will reach your FRA at the age of 66 and 10 months.
• A person born in 1960 or later has a FRA of 67 when they reach the age of 70 in 2026 or later
• The previous year is used for people born on January 1 of any given year.

A person who retires at age 62, the earliest possible retirement age, will receive a lower benefit than a person who waits until their full retirement age (FRA). The longer you wait, the larger the monthly payment reduction.

If you retire earlier than 36 months before your normal retirement age, your benefits will be reduced by 5/9 of one percent for each month before your normal retirement age. If the number of months before your normal retirement age exceeds 36, the benefit will be further reduced by 5/12 of one percent.

You can increase your future Social Security benefits in two ways if you continue working after your full retirement age and don’t apply for benefits: each extra year you work adds another year of earnings to your Social Security record, which can result in higher retirement benefits.

Your Social Security benefit increases by 8% each year you delay receiving benefits beyond full retirement age. For every full year you delay receiving benefits beyond full retirement age, your benefit increases by 8%.

4. Contributing to Social Security in 2025

Depending on your income, you will no longer be able to claim Social Security benefits in 2025.

For retirement benefits to be paid, you must earn a certain number of Social Security credits. You cannot receive benefits if you do not have enough credits. To qualify for benefits, you must earn 40 work credits, and you can earn up to four credits per year.

Credits are also used by the SSA for determining your eligibility for retirement and disability benefits, Medicare, and survivor benefits.

For one credit in 2025, you must earn $1,810 in wages and self-employment income, while for four full credits, you must earn $7,240. The amount will increase in 2026 as well. For a credit in 2024, you only had to earn $1,730, $80 less than you need to earn in 2025.

In addition to earning 40 credits, earning more credits won’t increase your retirement benefit payment. Instead, your retirement benefit is based on what you earned during your working years.

5. The earnings test: you can earn more while collecting benefits in 2025

Due to a Social Security rule known as the earnings test, continuing to work while collecting Social Security could reduce your monthly benefit payments.

In 2025, Social Security will temporarily withhold $1 from workers’ benefits for every $2 they earn over $23,400, up from $22,320 in 2024. You forfeit only $1 in benefits for every $3 of earnings above $62,160 when you reach full retirement age. That’s $2,640 more than the $59,520 limit in 2024.

Also check: How Do I know If My Social Security Number Has Been Stolen?

The monthly Medicare Part B premiums are increasing

A beneficiaries’ 2025 benefit payment bump may vary depending on just how much Medicare Part B premiums are deducted from their Social Security checks.

There are several services covered under Medicare Part B, including physician care, outpatient hospital care, home health care, and durable medical equipment.

From $174.70 in 2024 to $185 per month in 2025, the standard Part B premium will increase by $10.30.

The Part B deductible will also rise to $257 in 2025, up $17 from the $240 annual deductible for 2024.

Medicare Part B premiums are determined by a beneficiary’s modified adjusted gross income (MAGI) from their tax returns from two years ago. The standard monthly Part B premium will be paid by beneficiaries whose MAGI in 2023 was less than or equal to $106,000, as well as married couples with less than or equal to $212,000 in MAGI in 2025.

IRMAAs will increase the monthly premium payments of beneficiaries with higher incomes.

It is now legal for Medicare to cap prescription drug costs at $2,000

With the Inflation Reduction Act, Medicare Part D drug out-of-pocket costs will now be capped at $2,000 per year.

In 2025, the highest deductible for Medicare Part D drug plans will be $590, and beneficiaries with deductibles will be responsible for out-of-pocket expenses until that threshold is met.

As soon as beneficiaries pay their full deductible, they will have to pay 25% of coinsurance until they reach $2,000 for generic and brand-name drugs out-of-pocket. As a result, beneficiaries will be protected from out-of-pocket Part D costs for the rest of 2025 through what’s known as catastrophic coverage.

Instead of paying out-of-pocket costs all at once, beneficiaries will also be able to pay them monthly.

The cost of insulin can also be capped at $35 per month, both under Medicare Part D covered treatments and under Medicare Part B covered insulin pumps.

It is getting closer to the time when the Social Security trust fund will run out

Unless Congress acts sooner, the Social Security trust fund may deplete in 2033, leaving 79% of retirement benefits unpayable unless the program is reformed.

The combined trust funds of Social Security – which pay retirement and disability benefits – are projected to run out in 2035.

It’s getting closer to the depletion dates now that the calendar has changed to a new year.

Specifically, the recently passed Social Security Fairness Act may cause the trust fund depletion date to move forward six months.

The major issue right now is how to shore up those trust funds, according to Shedden. “That will require very comprehensive, bipartisan changes to multiple parts of the Social Security rules.”

Financial Planning: Why These Changes Matter

Whether you’re a retiree, a high-earning employee, or an employer, understanding these changes in Social Security is important for making informed financial decisions.

COLA increases of 2.5% help retirees offset rising living costs by raising monthly benefits by a modest amount. It’s the perfect time of year to review your budget, reassess expenses, and align your retirement plan with your financial goals.

From 2025, high earners and businesses will be required to pay higher payroll taxes due to the higher taxable income cap.

By planning now, you can manage cash flow, improve payroll systems, and refine your tax strategy. In the coming year, staying informed about these updates will enable you to navigate the financial changes confidently, no matter what your situation may be.

Confidently plan ahead

For more information about how these upcoming changes may affect your retirement plans or payroll strategies, contact your CRI tax advisor. In order to prepare you for a smooth transition into 2025, our team is ready to guide you through these changes and help you make informed financial decisions.