The clock is ticking on politicians in Washington to make major Social Security reforms. Without changes to the program, the Social Security Board of Trustees expects to deplete the trust fund by 2033 as outflows continue to exceed inflows. At that point, inflows from Social Security tax will only support 79% of benefits due to retirees.

While we’ve yet to see any major overhauls to the program, 2025 brings with it several major changes that everyone needs to know. They can impact you whether you’re retired or still working, and whether you collect Social Security already or still have some time before you apply for benefits.

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1. The cost-of-living adjustment

Seniors get a bump in their Social Security benefit every year called the cost-of-living adjustment (COLA). The 2025 COLA of 2.5% was announced in October and goes into effect in January.

The COLA is based on a subset of the Consumer Price Index, known as CPI-W. The CPI-W tracks a basket of goods representative of the typical urban wage earner or clerical worker’s spending habits. Every year, the Social Security Administration calculates the year-over-year increase in the average CPI-W reading for the third quarter. That reading becomes the COLA for the following year.

Importantly, the COLA will impact the benefits of anyone age 62 or older, regardless of whether they’re collecting benefits yet. Those who already collect benefits will see their monthly check increase 2.5% starting in January. Those who haven’t yet will see their potential benefit increase 2.5% on top of the increase for continuing to delay retirement benefits if still below age 70.

2. High earners will pay more in Social Security tax

If you’re a high earner, you might see an increase in tax withholdings from your paycheck starting in January. That’s because the government caps the amount of wages subject to Social Security tax. That cap increases every year as the standard of living increases.

The earnings limit for 2025 is $176,100. That’s up from $168,600 in 2024. This means that anyone earning over the 2025 limit will see an additional $465 withheld from their total pay this year, about $17.88 per biweekly paycheck.

Readers might notice that the increase in the earnings cap (as a percentage) is more than the COLA. That’s because the Social Security Administration use average wage data to calculate changes in the taxable limit. In other words, the discrepancy is a result of increases in the average quality of life, as wages climbed faster, on average, than prices. The SSA uses the same data to adjust your earnings record for inflation before calculating your retirement benefit.

3. You can earn more from work while collecting benefits

If you continue to work in your early 60s while collecting Social Security, you may end up unintentionally reducing your monthly benefits check. This is due to a rule called the Social Security earnings test.

Anyone collecting Social Security before reaching their full retirement age is subject to the earning test. The test will withhold $1 of benefits for every $2 in excess of a certain earnings threshold. (The threshold is higher during the year you reach full retirement age, and the withholding is reduced to $1 for every $3 above the cap.)

For 2025, you can earn $23,400 ($62,160 in the year you reach full retirement) in wages before seeing a reduction in benefits. That limit is up from $22,320 ($59,520) in 2024.

If you find your benefits reduced by the earnings test, know that money isn’t gone forever. Instead, the Social Security Administration adjusts your benefit upon reaching full retirement age to account for the foregone payments. If your benefits are reduced by the equivalent of six months worth of payments, for example, it’ll be as if you delayed claiming benefits by six more months from your original claim date once you reach full retirement age.

The rule can be a detriment to those who rely on Social Security plus their job to make ends meet in their mid-60s. Those who claimed early, go back to work, and no longer rely on retirement benefits may see it as an advantage to get more out of the program later. Either way, it’s a very important rule to know if you plan to continue working after claiming Social Security.

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