More than 51 million retired workers received a Social Security check in August 2024, and most depend on those monthly benefits to make ends meet. Indeed, nearly 90% of retired workers view Social Security as an important source of income, according to Gallup.

Knowledge gaps concerning Social Security can lead to financial mistakes and lost spending power in retirement. So, beneficiaries must stay informed on changes to the program. Read on to learn about three big Social Security changes that will take effect in January 2025.

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1. Social Security benefits will get a cost-of-living adjustment (COLA) in 2025

Social Security benefits are protected from inflation by cost-of-living adjustments (COLAs), annual pay increases tied to a subset of the Consumer Price Index known as a the CPI-W. The 2025 COLA is particularly important because Americans have listed inflation as their greatest financial concern for three consecutive years, according to Gallup.

The COLA applied to benefits in 2025 depends on the percent increase in the CPI-W during the third quarter of 2024, meaning the three months between July and September. The Bureau of Labor Statistics will publish September CPI-W data on Oct. 10, at 8:30 AM ET. Shortly thereafter, the Social Security Administration will issue a press release detailing the official 2025 COLA (available through this link).

That link currently provides details concerning the 2024 COLA, but it should be updated at some point on Oct. 10 to reflect the 2025 COLA. Additionally, Social Security recipients will receive a COLA notice by mail in December that explains their updated payment amount for 2025. They can also access the information in the Message Center of their my Social Security account.

In the meantime, The Senior Citizens League (TSCL) estimates benefits will increase 2.5% in 2025. Social Security recipients can use that figure to estimate how much additional income they will get next year. The chart below shows how a 2.5% COLA would impact the average monthly payout for different beneficiaries.

Data source: Social Security Administration, The Senior Citizens League. Payments have been rounded to the nearest dollar.

2. Social Security’s full retirement age will increase in 2025

Social Security’s full retirement age (FRA) will increase next year. FRA is the claiming age at which the benefit paid to a retired worker will equal their primary insurance amount (PIA). When a worker attains FRA depends entirely on their birth year, as detailed in the chart below.

Data source: Social Security Administration.

Based on the information above, two groups of workers will reach (or have already reached) FRA this year: (1) Those born in the second half of 1957 reached FRA at 66 and 6 months during the first half of 2024, and (2) those born in the first four months of 1958 will reach FRA at 66 and 8 months during the last four months of 2024.

FRA will increase in 2025, such that (1) workers born in the last eight months of 1958 will reach FRA at 66 and 8 months during the first eight months of 2025, and (2) workers born in the first two months of 1959 will reach FRA at 66 and 10 months during the last two months of 2025.

So what? Workers are eligible for retirement benefits at age 62, but they will not get their full payout, or PIA, unless they claim Social Security at FRA. Workers that claim earlier receive a reduced benefit, meaning they get less than 100% of their PIA. Workers that claim later (up to age 70) receive an increased benefit, meaning they get more than 100% of their PIA. The precise reduction or increase depends on how early or late Social Security starts.

3. Certain retired workers under FRA will have benefits withheld in 2025

As mentioned, eligibility for retirement benefits begins at age 62. That’s true whether or not a person is still working. But anyone that claims Social Security prior to FRA will have some benefits withheld if their income exceeds certain levels known as the retirement earnings test (RET) exempt amounts.

There are two RET limits: A lower limit that applies to workers who will not reach FRA during the current year, and a higher limit that applies to workers who will reach FRA during the current year. How those limits impact benefit payments is explained below.

• Security recipients under FRA for the entire year will have $1 in benefits withheld for every $2 in earnings above the lower limit.
• Social Security recipients that will attain FRA during the year will have $1 in benefits withheld for every $3 in earnings above the upper limit.

The Social Security Administration will announce the official RET limits for 2025 in the same press release as the COLA. But Social Security’s Trustees estimate the lower limit will increase to $23,280 (up from $22,320) and the upper limit will increase to $61,800 (up from $59,520).

RET limits do not apply after FRA, meaning Social Security recipients can earn any amount income without benefits being withheld. Additionally, benefits that are withheld do not represent lost income. Instead, they are added to monthly payments after FRA. Workers typically recoup most or all withheld benefits over of a typical life span.

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