2024 is coming to an end quickly, and several changes and adjustments are set to take effect in the world of Social Security in the new year. Most of these are inflation-related, and while some apply to retirees who already get Social Security, others apply to those who are about to start collecting their benefits or who are still working.
Without further delay, here are five changes to Social Security coming in 2025 that you need to know about.
Social Security beneficiaries are getting a 2.5% cost-of-living adjustment, or COLA, starting with the payment they receive in January 2025. As of the latest data from October, the average retired worker received $1,925.46 per month from Social Security, so this implies that the average will be about $1,974 once the COLA goes into effect.
The Social Security benefit formula itself isn’t changing, but the so-called “bend points” are.
The basic idea behind the Social Security formula is that your 35 highest-earning years are indexed for inflation and averaged, and your monthly average earnings is applied to a formula with three multipliers — 90%, 32%, and 15%. These percentages stay the same each year, but the amount of money they apply to, known as the bend points, changes. For those first becoming eligible in 2025, the formula applied to average indexed monthly earnings (AIME) is:
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90% of the first $1,226.
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32% of the amount between $1,226 and $7,391.
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15% of any AIME greater than $7,391.
As a result of inflation-related adjustments, the maximum possible Social Security benefit is increasing. The most someone who retires at their full Social Security retirement age in 2025 will be $4,018 per month. However, since most people don’t start collecting Social Security at their exact full retirement age, consider this:
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The maximum possible benefit for someone retiring at 62 in 2025 will be $2,831 per month.
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The maximum possible benefit at age 70 will be $5,108 per month.
Here’s a change that applies to people who are still working, as well as those about to start collecting Social Security. In 2025, the contribution and benefit base is rising to $176,100 from the 2024 level of $168,600.
This figure is often referred to as the “Social Security taxable maximum earnings,” because the 6.2% Social Security tax on employers and employees only applies to this level of income. However, it also has to do with the benefit calculation, as it is the maximum amount of money that can be used to determine AIME, which I discussed in the formula section earlier.
