Social Security's 2025 Cost-of-Living Adjustment (COLA) Is a Bit of a Downer. But There's a Silver Lining for Some Early Claimers.

Social Security's 2025 cost-of-living adjustment (COLA) didn't come as a surprise to many who have been keeping an eye on the inflation data. But that doesn't stop it from disappointing the millions of retirees who were hoping for more. The 2.5% increase will add just $49 to the $1,927 average Social Security check next year.

Many feel this isn't adequate to keep up with their rising expenses. However, another 2025 Social Security change might give a little more breathing room to some who have paid a steep price for claiming benefits early.

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Earnings test limits are changing

The Social Security earnings test applies to workers who earn an income while also claiming Social Security under their full retirement age (FRA). This is the age at which you become eligible for your full Social Security benefit based on your work history to date.

The table below can help you identify your FRA if you're not sure what yours is:

Data source: Social Security Administration.

It's possible to claim Social Security while continuing to work, but if you're under your FRA at the time, the government may withhold some of your benefits. This is known as the Social Security earnings test.

Those who were under their FRA for all of 2024 lose $1 from their checks for every $2 they earn over $22,320. And those who reached or will reach their FRA this year lose $1 for every $3 they earn over $59,520 if they earn this amount before their birthday.

These limits are increasing in 2025, which means you'll be able to earn more money before the government starts withholding anything from your checks. If you'll be under your FRA for all of next year, you can earn $23,400 before you'll begin to lose any money from your benefits. Those who will reach their FRA next year can earn up to $62,160 before their birthday and still receive their full Social Security check.

What happens when you have money withheld from your checks

Though the 2025 limits are higher, some workers will likely still have money withheld from their Social Security checks next year. It might be disappointing now, but those funds will come back to you in another way.

When you reach your FRA, the government will increase your benefit amount to account for the money it previously withheld. This increase is permanent, and it could result in thousands of dollars more over your lifetime. The change happens automatically. You don't have to contact the Social Security Administration to do it for you.

There's no way to opt out of it either. If you think you'll get less next year as a result of the earnings test, you may need to adjust your retirement budget. Perhaps you reduce your spending or rely more upon your income from your job instead of your Social Security checks. Or you may need to withdraw more of your personal savings to cover your living costs.

It might be frustrating now, but the larger checks in the future will definitely be advantageous. Also, the earnings test limits increase every year, so you may not lose benefits every year until you reach your FRA.