For many Americans, Social Security can feel like a constant source of stress. Balancing biweekly paychecks is tough enough during your working years, but stretching a modest monthly check in retirement can be even more challenging.
Add to that the complicated eligibility rules and fears of reduced or delayed benefits, and Social Security might not seem so secure after all. However, changes to Social Security in 2025 are on the horizon. While some adjustments may ease worries, others might stir up new concerns.
In May 2024, the Social Security Administration (SSA) confirmed that the Social Security Trust Funds should remain on track until at least 2035. This is welcome news for current retirees and those nearing retirement. But for Gen Xers approaching retirement in the years after that, there’s still some uncertainty.
The final updates to these 2025 changes will be announced by the SSA in October 2024. In the meantime, here are three key changes retirees should prepare for.
1. Full Retirement Age Is Going Up (Again)
In 2025, the full retirement age (the age at which you can start receiving full, unreduced benefits) will increase again, moving to 66 years and 10 months.
While this might not sound like a big shift, collecting benefits before this age—like at 62—will result in reduced payments. On the flip side, delaying benefits until age 70 can increase your monthly check by up to 8%.
The full retirement age varies based on the year you were born, so be sure to check out the SSA’s retirement age chart to see when you qualify for full benefits.
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2. Social Security Credits and Tax Caps Will Rise
In 2025, there will also be changes to the amount of Social Security credits you need to qualify for benefits, as well as the tax cap for high earners. Social Security is funded through the income taxes workers pay throughout their careers.
A portion of your earnings equals one credit, and you need to accumulate 40 credits to be eligible for benefits. In 2023, earning $1,640 gave you one credit. That number increased to $1,730 in 2024, and it’s expected to rise again in 2025.
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3. Expect a Modest Cost-of-Living Increase
If you’ve ever gotten a small raise that felt more like pennies than a real pay bump, the upcoming cost-of-living adjustment (COLA) for Social Security in 2025 may feel similar. The projected increase is only 2.5%, which is much lower than the 3.4% increase in 2024 and the 8.7% boost in 2023.
Why the drop? It’s all tied to inflation. The SSA calculates COLA based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Inflation is expected to be lower in 2025, which means a smaller COLA increase.
While inflation may cool off, the prices of essentials like groceries are still high, so a 2.5% increase may leave retirees wondering if it’s enough to cover their basic needs.
As 2025 approaches, retirees should stay informed and be prepared for these upcoming changes. While some updates are small, they could have a big impact on your financial future in retirement.