In April, nearly 51 million retired-worker beneficiaries brought home an average Social Security check of $1,915.26, which works out to almost $23,000 over a full year. While this might not sound like a lot of money, Social Security has played a key role in shoring up the financial foundations of retirees and helping them pay their bills.
More than two decades of annual polling from Gallup found that between 80% and 90% of then-current retirees consistently rely on their Social Security income to cover at least some portion of their expenses. This means the annual changes that can occur to America's top retirement program are of the utmost interest and importance to current and future beneficiaries.
Although the Social Security Administration (SSA) won't be announcing any concrete adjustments until the second week of October, beneficiaries can expect six changes to take place in 2025.
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1. Social Security's cost-of-living adjustment (COLA) should modestly increase benefits
The unquestioned most-anticipated Social Security "change" each year is the cost-of-living adjustment (COLA). The best way to think about COLA is as the mechanism used by the SSA to account for inflation. In other words, if the goods and services seniors purchase rise in price, Social Security checks should, ideally, rise by the same amount to ensure no loss of purchasing power. COLA is the tool tackling that task.
For the last three years, COLAs have come in ahead of the two-decade average of 2.6%. In 2022, 2023, and 2024, beneficiaries enjoyed respective increases to their Social Security checks of 5.9%, 8.7%, and 3.2%. In 2025, this increase might be a bit more modest than in recent years.
Following the release of the April inflation report, nonpartisan senior advocacy group The Senior Citizens League ever-so-slightly adjusted its long-term COLA forecast for 2025 from 2.6% (following the March report) to 2.66%. Since cost-of-living adjustments are rounded to the nearest tenth of a percent, a 2.7% COLA for the upcoming year would come in just a hair above the two-decade average.
What would a 2.7% COLA actually mean for beneficiaries? Keeping in mind that we haven't even reached the months that matter for the COLA calculation, an estimated 2.7% cost-of-living adjustment in 2025 would increase the average retired worker's check by close to $52 per month. Meanwhile, workers with disabilities and survivor beneficiaries would see their monthly payouts increase by an estimated $42 and $41, respectively.
2. High earners will almost certainly owe more in payroll tax
A second change that's likely coming down the pipeline for 2025 is that high earners will be opening their wallets a bit wider.
In 2024, all earned income -- wages and salary, but not investment income -- between $0.01 and $168,600 is subject to Social Security's 12.4% payroll tax. This tax generates more than 90% of the revenue the program collects and disburses to eligible beneficiaries. Any wages and salary earned above $168,600 (what's known as the maximum taxable earnings cap) are exempt from the payroll tax.
However, the maximum taxable earnings cap adjusts in lock-step with the National Average Wage Index (NAWI) most years -- the only exception being in years where there is no COLA and deflation occurs. With the prices for goods and services rising, NAWI should climb in 2025 and lift the maximum taxable earnings cap above $168,600.
For the roughly 94% of working Americans who earn less than $168,600 and are paying into Social Security with every dollar they earn, this change is a moot point. But for the 6% of high earners who have a portion of the earnings exempted, it would mean owing more in payroll tax next year.
3. Social Security's maximum monthly benefit is likely to increase, once again
Although high-earning workers could owe more in payroll tax in 2025, lifetime high-earners are likely to see their maximum monthly retired-worker benefit increase, too. Yes, there's a cap to how much the program will pay out in benefits at full retirement age.
In 2024, the maximum monthly payout for a worker retiring at full retirement age is $3,822, which represents a $195 jump from where it stood in 2023. While the increase in 2025 is likely to be more modest, it should nevertheless be higher than $3,822.
Only around 2% of retired-worker beneficiaries qualify for this maximum benefit, and they must meet three criteria:
- Retirees must have worked at least 35 years.
- Workers must have reached or surpassed the maximum taxable earnings cap in all 35 years the SSA uses to calculate their benefit.
- Retirees must wait until their full retirement age to claim their benefit.
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4. Disability income thresholds should climb
In April, approximately 7.25 million workers were receiving long-term disability benefits through Social Security. To maintain these benefits, disabled workers are only allowed to bring home a certain amount of earned income each month.
In 2024, non-blind disabled workers are able to earn up to $1,550 per month without having their benefits stopped, which is $80 per month more than in 2023. Meanwhile, blind disabled workers can bring in $2,590 per month without benefits ceasing -- $130 per month more than in 2023.
With inflation moderating a bit from the prior year, the Social Security disability income threshold for non-blind beneficiaries might top $1,600 per month in 2025, while the threshold for blind beneficiaries may near $2,700 per month.
5. Early filer withholding thresholds are expected to rise
Workers with disabilities aren't the only beneficiaries who might be able to hang on to more of their earnings next year without giving up some or all of their Social Security income.
Early filers, which includes anyone who's currently receiving a retired-worker benefit prior to reaching their full retirement age, can be subjected to a couple of penalties. In addition to a permanent reduction to their monthly benefit of up to 30%, depending on their birth year and claiming age, early filers can be exposed to the retirement earnings test. Based on your earned income, the retirement earnings test allows the SSA to withhold some or all of your benefits.
Retired-worker beneficiaries who won't reach their full retirement age this year (2024) can have $1 in benefits withheld for every $2 in earned income above $22,320, which works out to $1,860/month. Meanwhile, retired-worker beneficiaries who will reach their full retirement age during the current year can have $1 in benefits withheld by the SSA for every $3 in earned income above $59,520, or $4,960/month.
When the prevailing rate of inflation is climbing and Social Security beneficiaries are receiving a COLA, these early filer withholding thresholds increase. This means early filers should be able to hang on to more of their earnings next year without having to give up some or all of their benefits.
Once a worker reaches their full retirement age, the retirement earnings test is no longer applicable.
6. Qualifying for Social Security benefits will likely be incrementally tougher
Last, but not least, it'll almost certainly be incrementally harder for workers to qualify for Social Security benefits next year.
Despite what you might have heard or read online, Social Security benefits aren't something you're given just because you're born in the United States or became a citizen. Benefits are traditionally earned through work credits. You'll need 40 of these lifetime work credits to qualify for a retired-worker benefit, and no more than four credits can be earned annually.
The good news is that the bar is set pretty low to earn these credits. In 2024, one work credit equated to $1,730 in earned income. Thus, if you generate $6,920 in wages and salary this year ($1,730 times 4), you'll have earned the maximum four lifetime credits for 2024. Expect this income threshold to qualify for benefits to rise modestly in the upcoming year.
