Oct.10 was a big day for Social Security this year. That morning, the Social Security Administration announced a number of key changes to the program.
But while the program's rules are shifting in 2025, one specific Social Security rule is staying the same. And it's a rule that's been hurting retirees for years.
Meanwhile, here are the big changes that are happening come January.
Image source: Getty Images.
1. Benefits are getting a 2.5% cost-of-living adjustment
In 2025, Social Security benefits are rising by 2.5%. And while that might seem like a relatively small raise at first, on the plus side, it's also a sign of cooling inflation.
The typical senior on Social Security will see their monthly benefit rise by about $49 following that cost-of-living adjustment. Those on Medicare, though, will have to subtract about $10 to account for an increase in Part B premiums.
2. The earnings-test limits are increasing
Social Security's earnings-test limits apply to beneficiaries who haven't yet reached their full retirement age and are earning money from a job. In 2025, the earnings-test limit is $23,400, up from $22,320 in 2024. Beyond that point, $1 in Social Security benefits is withheld per $2 of earnings.
For those reaching full retirement age in 2025, there's a higher earnings-test limit of $62,160, up from $59,520 in 2024. Beyond that threshold, $1 in Social Security benefits is withheld per $3 of earnings.
3. The wage cap is rising
Workers don't automatically pay Social Security taxes on all of their earnings. There's a cap set every year that limits the amount of wages taxed to fund the program.
In 2025, Social Security's wage cap is $176,100, up from $168,600 in 2024. Higher earners will owe Social Security tax on an additional $7,500 of income, increasing their total added tax burden by $930. Those with employers get to split that bill down the middle, while the self-employed pay it all.
The one rule that really needs to change
One Social Security rule that isn't changing in 2025 is the threshold for taxes on benefits. Social Security recipients are subject to taxes on their retirement benefits based on their combined income, which is 50% of their annual Social Security benefit plus other taxable income and nontaxable interest income (such as what municipal bonds pay).
The problem is that the thresholds for combined income were set decades ago and haven't been updated since, despite the inflation and wage growth that's taken place through the years. For individual tax-filers, taxes on Social Security apply to a combined income of $25,000 or more. For married couples filing jointly, that limit rises to $32,000, which isn't a huge lift from the limit for singles.
All told, these are relatively low incomes compared to the cost of living today. And an adjustment to these combined income thresholds would no doubt spare a lot of seniors from having to pay taxes on their benefits.
Unfortunately, lawmakers don't seem to be in a hurry to change this rule anytime soon. And that means that anyone with a decent retirement income should not expect to get to keep their Social Security benefits in full. New Social Security recipients are often caught off guard when they learn that their monthly benefits are taxable, so it's best to be prepared for that scenario in advance.
