Here are two major Social Security changes retirees need to know about by 2025

One thing people are quick to notice about Social Security is that change is virtually inevitable. The rules change, the eligibility requirements change, the payments change, and there’s no reason to believe this will stop anytime soon – if ever.

Some Social Security changes only apply to certain groups of people, but others apply to most current or incoming beneficiaries.

Regarding the latter, there are two major changes to be aware of as we approach 2025. Even if you are not currently receiving benefits, they are worth knowing about as they could still be relevant to your future retirement plans.

The most notable change to Social Security benefits in 2025 should be good news. All current beneficiaries will receive an increase in their monthly benefit through Social Security’s cost of living adjustment (COLA).

The annual COLA is intended to offset the effects of inflation. Whether it’s food, clothing or housing, it seems that the prices of most goods and services are steadily increasing. And it has even more impact for those who benefit from fixed income sources like Social Security.

Fortunately, beneficiaries can expect a 2.5% increase in their monthly benefits starting in January 2025.

A 2.5% increase is below the COLA average since it became annual in 1975, but it could also be worse. There have been a few cases where benefits have remained the same, but this is more of an anomaly than the norm. Below you will find the last 10 COLAs:

Source: Social Security Administration.

Social Security uses inflation data from July, August, and September of the previous year to determine the COLA for the following year. So while the 2.5% COLA seems modest, it also means that inflation hasn’t been as high as in recent years. I’m sure many retirees don’t mind making this compromise.

Most American workers spend their careers paying Social Security taxes. If you have an employer, you both share the 12.4% Social Security tax, paying 6.2% each. If you are self-employed, you are responsible for paying the full 12.4%.

The (somewhat) good news is that not all of some workers’ income is necessarily subject to Social Security payroll taxes — only up to a certain amount, called the wage base limit.

The new salary base limit, which takes effect in 2025, is $176,100, up from the limit of $168,600 in 2024. This means that more of some workers’ income will be subject to payroll taxes. Social security.

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