Retirees relying on Social Security to cover their living expenses are about to experience three significant changes in 2025. Each year, Social Security beneficiaries receive an adjustment in their payments, largely driven by the cost-of-living adjustment (COLA).
However, for 2025, additional changes are on the way that could affect millions of Americans who depend on these payments.
These changes, ranging from an increase in benefits to adjustments in the full retirement age (FRA) and a rise in Social Security taxes, mean that both current and future retirees will want to stay informed and plan ahead. Below, we’ll break down the key updates and explain what they mean for you.
The 3 Major Changes in Social Security for 2025
1. Cost of Living Adjustment (COLA) Boost in 2025
Every year, retirees eagerly await the announcement of the COLA, which adjusts Social Security benefits to match inflation.
This ensures that benefits keep pace with rising living costs. While the official COLA for 2025 hasn’t been confirmed yet, experts predict a 2.5% to 3% increase, most likely settling around 2.5%.
Here’s what that could look like for retirees in 2025:
| Retirement Benefits | Average Social Security Check | 2.5% COLA Increase | Additional Income |
|---|---|---|---|
| Average Retiree | $1,900 | $1,948 | $48 |
| Age 62 | $2,710 | $2,778 | $68 |
| Age 67 | $3,822 | $3,918 | $96 |
| Age 70 | $4,873 | $4,995 | $122 |
This increase will help over 64 million retirees cover their everyday living costs as inflation continues to impact the cost of essentials like groceries, utilities, and healthcare.
2. Full Retirement Age (FRA) to Increase
The Social Security Administration (SSA) determines your full retirement age based on your birth year. Currently, the full retirement age ranges from 66 to 67, but in 2025, the FRA will increase slightly for new retirees. If you were born in 1959, you’ll need to wait until you’re 66 years and 10 months old to receive 100% of your benefits.
For younger retirees, the FRA will continue to rise. If you’re born after 1960, your full retirement age will be 67 by 2026. Those who decide to claim benefits earlier, at age 62, will receive lower monthly payments, while those who wait until age 70 will enjoy an 8% increase in benefits for each year they delay claiming.
3. Social Security Tax Increases for Some Retirees
The amount of income subject to Social Security tax is capped, but this limit increases almost every year. For 2025, it is projected that the taxable income cap will rise to $174,900, up from $168,600 in 2024.
This means that workers earning more than this threshold will have to pay additional Social Security taxes on the portion of their income exceeding the current limit.
For example, those who make more than $168,600 annually will pay taxes on an extra $6,300 of their income in 2025, contributing more to the Social Security system.
What Happens If Nothing Changes?
According to the Committee for a Responsible Federal Budget (CRFB), Social Security is facing a potential funding shortfall.
The program has been drawing from its reserves to keep up with the payments to retirees. Without changes to the current funding system, Social Security could be forced to cut benefits by as much as 21% in the coming decades.
If these cuts happen, it will be essential for retirees to understand the full impact on their benefits. The size of the reduction will vary depending on factors like age, work history, and lifetime earnings, meaning that individuals will need to plan their retirement finances carefully.
How to Prepare for the Changes?
As these changes take effect, retirees and future beneficiaries should stay informed. Knowing how the COLA adjustments, changes to the full retirement age, and tax increases will affect your Social Security payments can help you better prepare for your financial future.
It’s important to start planning now—whether it’s delaying retirement to maximize your benefits or adjusting your budget to account for possible changes in your Social Security income.
Understanding these updates ensures that you can make the best decisions for your retirement and continue enjoying financial security.