More than 71 million American citizens rely on Social Security as a form of financial support. And now the government has made significant changes to the policies for the remainder of 2025.
Whether you’re already receiving benefits or planning your retirement, here’s a breakdown of what’s changing and what it means for your wallet.
Cost-of-Living Adjustment (COLA) Remains at 3.2%
One of the most important annual updates to Social Security is the Cost-of-Living Adjustment (COLA), which helps beneficiaries keep up with inflation.
In January 2025, Social Security recipients began receiving a 3.2% increase in their monthly checks. While this is lower than the 8.7% spike in 2023 (a result of high inflation), it still provides modest relief for rising costs in food, healthcare, and housing.
For the average retired worker, this calculates to roughly $59 more per month—bringing the average monthly benefit up to about $1,907.
Increase in Maximum Taxable Earnings
If you’re still working, here’s a tax-related change that could affect your paycheck.
The maximum earnings amount subject to Social Security payroll tax rose from $160,200 in 2023 to $168,600 in 2025. That means higher earners will contribute more to Social Security in 2025.
Workers and employers each continue to pay 6.2% of wages.
Self-employed individuals pay the full 12.4%.
So, if you earn above $168,600, you won’t pay additional Social Security tax on income beyond that threshold—but anything up to that point is fair game.
Higher Earnings Limits for Early Retirees
If you claimed Social Security before your full retirement age (FRA) and are still working, there’s good news: the earnings limits have increased, this simply means that you can earn more without having your benefits reduced.
For 2025:
The limit for individuals under FRA is now $22,320 (up from $21,240 in 2023).
If you reach FRA in 2025, you can earn up to $59,520 in the months before your birthday without losing benefits.
If you earn above these limits, the SSA withholds $1 for every $2 earned above the first limit, and $1 for every $3 for the second. However, once you reach FRA, there is no penalty for working and earning more.
Social Security Disability Benefits Increased
Recipients of Social Security Disability Insurance (SSDI) also saw a boost from the 3.2% COLA increase. The average SSDI benefit increased to $1,537 per month in 2025. Those with qualifying dependents may receive even more.
Full Retirement Age (FRA) Adjustments Continue
The FRA is gradually increasing as part of many Social Security changes. In 2025:
- Anyone born in 1959 reaches FRA at 66 years and 10 months.
- For those born in 1960 or later, FRA will be 67.
This means if you’re nearing retirement, your FRA might be later than you thought and claiming early could reduce your benefits permanently by up to 30%.
No Major Reform, But Pressure Is Building
Social Security’s trustees project that the program’s trust funds would run out by 2034, at which point it could only pay about 80% of scheduled benefits. That’s why lawmakers are under increasing pressure to strengthen the program’s finances, whether through tax changes, benefit caps, or a new revenue source.
While these changes won’t dramatically overhaul the system, they do affect how much money you can expect, contribute, or earn while on benefits in 2025. Here’s what you can do:
- Check your Social Security statement to review your projected benefits.
- If you’re still working, consider the new taxable limit into your financial planning.
- If you’re receiving benefits, be mindful of earnings limits to avoid withholding surprises.
Whether you’re collecting checks or still building your nest egg, understanding these updates can help you make smarter financial decisions for the year ahead.