If no changes are implemented to the Social Security program, the Social Security trust fund is projected to be depleted by 2033. If this comes to pass, the program will only have the ability to pay around 79% of benefits to retirees. Due to this issue, Social Security reform has been one of the more pressing topics in Washington as of late. As such, Congress is now under pressure to make a substantial change in order to ensure the longevity of the program which will, in turn, allow for the millions of Americans who are reliant on their monthly benefits to continue maintaining their standard of living going forward.
At present, several other changes have also been implemented which will impact the current cohort of beneficiaries.
Social Security benefit increase
Each year, the Social Security benefit amount is adjusted to account for the effects of inflation. This is known as the cost of living adjustment, or COLA. The COLA is determined using the measure of inflation from the previous year and as a result, the value of the monthly benefit is increased so as to aid the beneficiaries in keeping up with rising the costs of goods or services. For 2025, the COLA was 2.5%.
Seniors who have not yet begun claiming Social Security will also be impacted by the COLA. Individuals aged 62 and above will also have their potential benefits increased for when they do eventually begin claiming. In short, you do not have to be an active beneficiary to have access to the COLA.
An additional group of beneficiaries will also get to enjoy an increase to their monthly benefit now that the Social Security Fairness Act has officially been signed into law. The new Fairness Act repeals the provisions of the Windfall Elimination Provision and the Government Pension Offset which reduced the benefits for millions of public sector workers. Under the new act, however, they will now receive their full benefits, as well as retroactive payments dating back to January 2024.
Claiming early
Whilst it is possible to begin claiming benefits whilst continuing to work, there is a rule called the retirement earnings test in place which could cause a reduction to your benefits. “The Social Security Administration will reduce annual benefits by $1 for every $2 someone earns above the threshold for the year. There’s a higher earnings threshold in the year you reach full retirement age, and the reduction is just $1 for every $3 you earn above it,” according to Yahoo!Finance.
The earnings limit is increased by the Social Security Administration on an annual basis. For 2025, the earnings limit is “$23,400 for any age before full retirement and $62,160 for the year you reach full retirement age. Those are up from $22,320 and $59,520, respectively.”
As a result, retirees are able to earn a bit more each year before their benefit is impacted.
Medicare
Medicare is a government run health insurance program for seniors and most retirees aged 65 and above are enrolled to the program. The Social Security Administration automatically deducts the premium amount for beneficiaries who are enrolled to the Medicare program. This is done in order to ensure the payments roll out smoothly and with ease each month since the premiums are heavily subsidized by the government even though seniors are required to pay the monthly premium.
This year, the government raised the monthly premium for Medicare Part B by about 5.9% to $185 per month for individuals with a modified adjusted gross income below $106,000, and $212,000 for couples. Since this figure is considerably larger than the COLA and compared to the previous year, Medicare premiums will eat up a bigger fraction of many retirees’ benefit checks.
For those who saw no change to their benefit amount from last year even after the COLA came into effect, it should be noted that the Medicare cost outweighs the COLA increase. This is due to the hold harmless clause which ensures that seniors with small benefit amounts will not see a reduction in their net monthly Social Security benefit figure.