There’s good news ahead for seniors.
Millions of retirees today collect Social Security. And even if you’re someone with a nice amount of savings, you might still be pretty reliant on the program for monthly income.
The good news is that the Social Security Administration recently announced some key updates to the program that are set to take place in 2025. Here are two positive changes that could result in more money for you starting in January.
Image source: Getty Images.
1. A 2.5% cost-of-living adjustment
Social Security benefits are eligible for an automatic cost-of-living adjustment (COLA) every year. The purpose of COLAs is to help recipients maintain their buying power as inflation pushes living costs upward.
In 2024, Social Security benefits received a 3.2% COLA. Next year’s raise isn’t quite as high, and benefits will only increase by 2.5% in 2025. However, that’s not necessarily the bad news it might seem like at first.
A smaller Social Security COLA means that inflation is slowing down. So actually, you might do quite well with a 2.5% increase to your monthly Social Security checks because it’s coming at a time when prices aren’t rising so rapidly.
You should also know that while Social Security benefits are eligible for a COLA each year, they don’t automatically get one. When inflation remains flat or decreases from one year to the next, Social Security benefits stay the same. So while a 2.5% COLA certainly isn’t the largest raise the program has ever dished out, it’s far better than nothing.
2. A higher earnings-test limit
Working during retirement is a great way to supplement your Social Security benefits, keep busy, and maintain social connections. And the good news is that you’re definitely allowed to work and collect Social Security at the same time.
But if you do so before reaching full retirement age, earning too much money could result in having some of your Social Security benefits withheld. If that happens, you won’t lose out on that money forever. Rather, you’ll have a portion of your benefits withheld until your full retirement age arrives, at which point you’ll get that money back.
Either way, in 2025, you get more leeway to earn money without having to worry about it negatively impacting your Social Security checks. That’s because the program’s earnings-test limits are rising.
In 2025, you can earn up to $23,400 without having benefits withheld. That’s up from $22,320 in 2024. From there, you risk having $1 in Social Security withheld for every $2 you earn.
If you’ll be reaching full retirement age at some point in 2025, you’re subject to a higher earnings-test limit. In that case, it’s $62,160, up from $59,520 in 2024. From there, you risk having $1 in Social Security withheld for every $3 you earn.
It’s positive news all around
All told, these two Social Security changes have the potential to improve a lot of older Americans’ finances in the new year. And if you’re someone who’s shied away from working part-time for fear of it taking away from your monthly benefits, know that you may be able to supplement your income quite nicely without losing a dime of Social Security on a month-to-month basis.
