Retirees’ Paychecks in 2025: Understanding Planned Social Security Changes

Life has good times and challenges that can affect our lives. Although change is a necessary part of everyday life, it may be more difficult for some people to handle than others. As everyone’s lives change, so do changes to Social Security, the federal agency that provides millions of payments to retirement, survivor, disability, and SSI beneficiaries.

Changes aren’t always negative, though; in fact, next year might be just another one in which Social Security wins. If you’re currently eligible for retirement benefits, continue reading to find out more about the coming changes in 2025 and to whom they apply perfectly.

Increases

Social Security payments are usually adjusted annually for a cost of living increase to keep the purchasing power of a retiree’s paycheck, which represents ongoing life expenses. A COLA, though, is not assured in any one year. For one to take effect, inflation occurs from one year to the other.

Luckily, throughout most of 2022, inflation rates were extremely high. Now, in 2024, the annual rise in living costs is stable. That means some sort of increase in Social Security benefits in 2025 is likely to happen.

How big it will be is yet unknown, as the COLA for each January is determined based on inflation data from the previous third quarter.

The newest estimate from the non-partisan Senior Citizens League has COLA–the cost-of-living adjustment to Social Security–jumping 2.57% in 2025. Less than the 3.2% increase in place earlier this year, while it is an increase.

Maximum Payment

Not all workers pay Social Security taxes on every single dollar they earn, so high earners only pay Social Security taxes on every dollar up to the payroll tax threshold, adjusted annually. However, there is a maximum monthly payment that Social Security will provide, which is the flip side.

In 2024, the maximum monthly payment for a person who claims at full retirement age is $3,822, and $4,873 if they delay benefits.

The beneficiary is only able to receive the total monthly benefit if they have reached the full retirement age and have worked for the required number of years, thus having paid enough Social Security taxes. The retired worker must be paying according to their respective taxable income, in order to get the lump sum of $4,873.

In addition to these maximum monthly payments, retirees are also eligible to receive an average of $2,710 and an average of $1,900 if they claim benefits before full retirement age.

Earnings Test Limit

Contrary to popular belief, you can work and receive Social Security at the same time. it’s possible. But if you’re working while receiving benefits and haven’t yet reached full retirement age, you risk having some of your benefits withdrawn if you exceed what’s called an income-tested limit.

This year, if you haven’t yet reached your full retirement age but plan to reach it by the end of the year, the income test limit is $22,320 or $59,520.

Next year, these limits are likely to increase, which means you may be allowed to earn more money without having to worry about having to withdraw from Social Security. But to clarify, you do not lose the percentage that was withdrawn due to exceeding your income testing limit.

When you’re old enough to retire, that money will be added back into your monthly check. Also, remember that, depending on the circumstances, changes can be beneficial or harmful.