If you are retired or nearing retirement, you know just how critical Social Security is. The program doles out roughly $1.5 trillion in benefits each year to tens of millions of Americans, the majority of whom are retired. Given that about 40% of these retirees receive at least half of their income from Social Security and nearly 15% rely almost entirely on it, any changes to the program have major implications.

Some changes are on the way for 2025 that retirees should know. Not all retirees will be affected by these changes, but all retirees will be affected by at least one.

1. You will be receiving more money every month

Every year since 1975, the Social Security Administration (SSA) has calculated a cost-of-living adjustment (COLA) to keep retirees’ income relatively stable over time. The COLA is calculated by looking at inflation from the year before and then raising benefits to match. In 2025, retirees will see a 2.5% bump from their current checks. The average monthly benefit for retired workers as of September was $1,920. That means next year, the average check will be roughly $1,968.

Unfortunately, there is evidence that these COLAs have not done what they are supposed to do. A prominent advocacy group, The Senior Citizen League (TSCL), estimates that retired Americans have lost 30% of their purchasing power since 2000 because the COLA uses an inflation metric that tracks the spending habits of working-age Americans. As you can imagine, seniors have different needs and spending priorities than younger people, especially regarding healthcare, which has seen costs soar.

There have been calls to change the metric to one that better reflects reality for seniors. Unfortunately, despite awareness of the problem for years, the SSA still relies on the problematic metric.

2. You may need to be older to receive full benefits

Retirees have a choice about when to begin claiming benefits. The amount you receive is based on when you choose to do so. You can begin at 62, but your benefits will be reduced by up to 30% from what your full benefit would be. This is scaled up until you reach full retirement age (FRA), at which point you receive 100% of benefits. However, the FRA is based on when you were born. The change in 2025 will have no effect if you were born before 1958 or decided to claim benefits early.

For those born in 1959, however, you will need to reach 66 and 10 months before receiving 100% of benefits. This is up from 66 and 8 months in 2024 for those born in 1958. You can choose to delay benefits even further, receiving an additional increase each year until the maximum benefit is reached at age 70.

3. You can earn more before the SSA cuts your benefits

If you’ve reached FRA and are still working, you can earn as much as you want and the SSA won’t touch your benefits. That’s not true for those under the FRA cutoff. For these retirees, the SSA essentially “taxes” benefits for people who make more than a certain amount. In 2025, this maximum amount will be higher, putting more money in your pocket.

If you are under the FRA in 2024, the SSA deducted $1 from your benefits for every $2 you made over $22,320. In 2025 this cutoff rises to $23,400, amounting to $540 a year more in your pocket if you make over that amount.

It’s slightly more complicated for those reaching FRA in the middle of 2025. If that’s the case, you can earn up to $62,160 before the SSA touches your benefits. It then deducts $1 for every $3 earned above that. The month you reach FRA, however, the deductions stop.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

View the “Social Security secrets” »

The Motley Fool has a disclosure policy.