A number of rules have been changed for Social Security, including taxes, credits, check amounts and Full Retirement Age (FRA) rules. If you’re planning a budget for 2025, you’ll need to know about these changes, as reported in Kiplinger’s article, “Five Changes to Social Security in 2025.” These changes aren’t just for retirees; some impact wage earners.
Cost of Living Adjustment for 2025. The COLA for 2025 is the smallest increase since 2020—only 2.5%. The average retiree can expect about $49 more in their monthly benefit. The Social Security Administration says the average payment will go from $1,927 to $1,976, and married couples will see their benefits increase by an average of $75.
Full Retirement Age (FRA) is changing again. Older workers will need to wait a little longer to reach their FRA. In 2025, the FRA is 66 years and 10 months. If you turned 66 in 2024, the FRA is 66 years and 8 months.
If you were born in 1958, your FRA is 66 and 6 months, which you reached in 2024. Congratulations!
If you were born in 1959, your FRA is 66 and 10 months, and you’ll get there in 2025. If you were born in 1960 or later, your FRA is 67, and you’ll be eligible to receive benefits in 2026.
Social Security credits to qualify for benefits. The number of credits needed to qualify for benefits increased in 2025. To become eligible, workers must have 40 work credits and can earn up to four credits per year. In 2025, workers will need wages and self-employment income of $1,810 and earn $7,240 to get four credits.
Social Security tax limits. Social Security caps the amount you pay taxes on. In 2025, the tax limit is $176,100, which increased $7,500 from $168,600 in 2024. The cap is indexed on inflation and is expected to increase again in 2026.
Earnings test. People who work while collecting Social Security benefits reduce their monthly benefits because of the Social Security earnings test. If you haven’t reached FRA, $1 of your benefits will be reduced for every $2 earned over $23,400 in 2025. After reaching FRA, you lose less, forfeiting $1 in benefits for every $3 in 2024 earnings of about $62,160. This increased over the 2024 limit, which was $59,520.
This information isn’t glamorous and may even be discouraging. Still, if you are nearing retirement and considering when to take your benefits or planning your budget for 2025, you need to know it.
Reference: Kiplinger (Jan. 3, 2025) “Five Changes to Social Security in 2025”
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