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Social Security is undergoing crucial changes in 2025, and if you’re a retiree or approaching retirement, you need to be prepared. With the Social Security trust fund projected to run out of reserves by 2033, according to the 2024 Board of Trustees' report, these changes are more important than ever. Without reform, retirees could face reduced payments, receiving only 79% of their expected benefits.
While Social Security adjustments happen every year, some of the 2025 updates could have a major impact on your finances. Here’s what you need to know.
Starting in January 2025, all Social Security recipients received a 2.5% cost-of-living adjustment (COLA) to help keep up with inflation. This annual COLA is based on the third-quarter inflation rate of the previous year. For retirees relying on fixed incomes, this increase is essential to maintaining purchasing power.
Beyond the standard COLA, 3.2 million Americans will benefit from the Social Security Fairness Act, signed into law by President Biden in January 2024. This law repeals the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), which previously reduced Social Security benefits for retirees receiving certain pensions (e.g., government employees, railroad workers, nonprofit workers, and teachers).
If you’re still working while collecting Social Security, the amount of income subject to Social Security payroll tax has increased. In 2025, earnings up to $176,100 will be taxed, up from $168,600 in 2024.
Retirees who claim Social Security before full retirement age (FRA) but continue working are subject to an earnings limit. In 2025, that limit has increased:
Once you reach your full retirement age, there are no earnings limits, and your benefits will be recalculated to account for any withheld amounts.
Medicare premiums are deducted from Social Security payments, and in 2025, they’ve gone up. Medicare Part B premiums have risen from $174.70 to $185 per month, a 5.9% increase—higher than the 2.5% COLA increase.
Social Security reform is one of the most pressing issues in Washington. During the 2024 presidential campaign, several proposals were made to address the trust fund shortfall, including:
While no major reforms have been enacted yet, lawmakers face mounting pressure to act before the 2033 depletion date. Retirees should stay informed and plan ahead for potential changes.
Many retirees overlook strategies that could significantly increase their lifetime Social Security earnings. For example:
If you’re like most Americans, you want to maximize your Social Security benefits and avoid running out of money in retirement. By understanding these key changes and adjusting your financial strategy accordingly, you can ensure a more comfortable future.
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