The constant rise in inflation rates is troubling a majority of Americans, who have started to question their financial goals, especially the ones relying on Social Security benefits.

With more than 7.25 million Americans benefiting from Social Security and Supplemental Security Income (SSI), the recent changes announced by The Social Security Administration (SSA) came as a relief for retirees and high-earning workers. 

While it is a great piece of news, it never hurts to revisit your budget and adjust your finances to make the most of these changes, especially if you are a retiree. We also recommend opting for a professional retirement planning service to ensure your Retirement funds remain relevant. 

What is Social Security Income?

Before we jump into the major changes and why they matter, it’s important to understand what SSI is. 

Supplemental Security Income (SSI) provided by The Social Security Administration (SSA) as a part of Social Security is financial protection for Americans. This includes benefits for retirees, disabled individuals, survivors, and family (current or former spouse and children).

Social Security Changes for 2025

Whether you are confident in your current financial goal or you’re asking yourself how much social security will increase in 2025, having a better understanding of these social security changes will help you manage your finances more effectively. 

Cost-of-Living Adjustments (COLA) for Retirees

For the last decade, the COLA has been hovering around 2.6%; however, it was 3.2% in 2024. The Social Security Administration’s official press release stated that nearly 68 million beneficiaries will see 2.5% Cost-of-Living Adjustments (COLA) from January 2025. 

These benefits adjustments are based on the Consumer Price Index (CPI) to ensure that retirees’ income can keep up with inflation. On the subject of inflation, Martin O’Malley, Commissioner of Social Security, said:

“Social Security benefits and SSI payments will increase in 2025, helping tens of millions of people keep up with expenses even as inflation has started to cool.”

Higher Tax Cap for High-Earners

For those still employed and wondering how much they can earn while also collecting Social Security, there’s also a new higher Social Security tax cap for high earners.

As of January 2025, the taxable maximum has been increased to $176,100 from $168,600. 

This means both employers and employees will pay an additional $465 in Social Security taxes in 2025. Although high-earners will pay more taxes, they’ll also receive higher Social Security benefits upon retirement.

Increased Maximum Social Security Benefits

Employees born after 1960 and retiring at the full retirement age (67) will also receive increased maximum Social Security benefits. These have jumped from $3,822 in 2024 to $4,018 in 2025.

Why These Changes Matter?

While the tax adjustments are made almost each year, COLA is doesn’t receive such changes.

Therefore, these updates to COLA and the higher tax cap are two of the most significant Social Security changes for 2025. 

• For retirees, the 2.5% COLA offers a financial boost to offset the rising inflation.
• For high earners, the increased tax cap reflects a step toward securing greater benefits after retirement. 

Planning ahead for these adjustments is crucial. Whether you are a retiree or still working, review your financial plan as per these changes to ensure a stable and secure future.

4 Key Adjustments Retirees Must Make As Per Social Security Change 2025

According to our experts, retirees must make these adjustments to their financial plans:

1. Adjust Your Budget for 2.5% COLA

Upon calculations, you will realize that change amounts to a $50 increase a month, which might not seem a lot, but it can effectively help with essential expenses like groceries. So, make sure you adjust your budget accordingly.

2. Reassess Inflation-Adjusted Expenses

Yes, these changes are introduced to offset inflation; however, certain costs, like healthcare, may rise more quickly than other expenses. Therefore, plan your budget and monthly expenses with costs in mind. 

3. Consider Saving 

If the changed 2.5% COLA leaves you with extra funds, then consider putting them into your savings account, emergency funds, or low-risk investment options. 

4. Review Long-Term Goals

This is also a great time to review and adjust your budget for long-term goals like traveling or a major purchase. Reach out to one of our financial experts to know how to maximize your Social Security benefits. 

Wrapping It Up 

These are some significant changes introduced by SSA. While inflation is cooling down, it is the ideal time for retirees to make the most of these benefits. 

Proactive financial planning with the aid of experts like Prosperity Financial Group can help you navigate these changes and secure your retirement.

Frequently Asked Questions (FAQs)

How much will my 2025 social security be?

As per SSA, Social Security benefits in 2025 will increase by 2.5%, which is about $50 per month. You can calculate your benefits using the Social Security Benefit Calculator.

What is the maximum Social Security COLA benefit?

The maximum Social Security COLA benefit for 2025 is 2.5%

Am I eligible for Social Security benefits?

Certain criteria make you eligible for Social Security benefits:

• 62 years or older
• Paid Social Security taxes for 10 years or more
• Current or former spouse’s work

For more information, visit the official Social Security Administration website.

How can I be notified of new Social Security Benefits?

The SSA has already begun notifying people about their new benefit amount by mail starting in early December.

How do I make the most of my Social Security Benefits?

You can make the most of your Social Security benefits with careful financial planning. Also, you can always reach out to professionals like Prosperity Financial Group to help you with your Retirement Planning. 

The post Social Security Changes 2025: Everything You Need to Know appeared first on Prosperity Financial Group | San Ramon, CA.

Elliot Kallen Wealth Manager | Registered Principal

For more than three decades, Elliot has provided customized wealth management solutions for entrepreneurs, business owners, retirees, and millennials.

Elliot and his wife, Tammy, are passionate about giving back to the community through their 501(c)(3) foundation, A Brighter Day. Through his partnership with A Brighter Day Charity, the Kallen family has helped local teens and young adults recognize and access resources to cope with the risks of stress and depression.

He enjoys spending his free time with his family. Some of his hobbies include cooking, wine, golf, travel, and studying history.

He lives in Lafayette, California with his wife, step-daughter, and grandson.