In 2025 comes a big change in social security. are you ready

Although Social Security has been around for decades, the rules of the program can change. And that makes sense.

Social Security must be able to adjust for inflation in several ways. And in 2025, a number of key changes are likely to occur that could impact retirees and workers alike. Here are some of the most notable changes to prepare for now.

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1. A cost of living adjustment

Social Security benefits are eligible for automatic cost of living adjustments (COLAs). The purpose of COLA is to help beneficiaries maintain their purchasing power as inflation drives up the cost of living.

At the beginning of 2024, social security benefits increased by 3.2%. Next year’s COLA, however, may not be as generous. Initial estimates put this number at 2.63%, but this may change depending on the evolution of inflation in the third quarter of the year.

Seniors on Social Security should brace themselves for a lower COLA in 2025. This could mean adjusting your expenses to try to cut expenses or taking to the gig economy for extra cash.

2. A higher limit for the earnings test

Older people with social security are also entitled to income from a job. But for those who have not yet reached full retirement age, there are income limits to keep in mind. Exceeding the annual earnings test limit means withholding some of those Social Security benefits (although rest assured that the withheld benefits are paid back to you once you reach retirement age).

In 2024, the earnings test limit is $22,320. However, if you will reach full retirement age by the end of the year and are not there yet, the limit is $59,520.

In 2025, the earnings test limit may increase, giving you a chance to earn even more money without negatively impacting your Social Security benefits. So if you’ve been looking to ramp up your work activity or increase your hours at a part-time job, it might be worth holding off until January to do so.

3. A higher salary cap

The main source of funding for social security is income from payroll taxes. But it’s not a given that workers will pay social security taxes on their entire income.

Each year, a salary cap is set to determine how much earnings are subject to Social Security taxes. The cap is currently $168,600. But in 2025, it is likely to increase.

Now, if you don’t expect your earnings to be more than $168,600 in 2025, then you don’t need to worry. But if you’re a higher earner, now may be the time to meet with a tax professional and work on some strategies to reduce your overall tax burden. And if you’re maxed out on it, budget carefully to account for the fact that you may lose more of your paycheck to Social Security taxes next year.

4. A higher earnings threshold to earn work credits

To collect Social Security in retirement, you generally have to earn a certain amount of money and pay taxes on that amount during your career. Of course, there are options to collect Social Security without working, such as filing for spousal benefits. But if that’s not an option, then you’ll want to make sure you’re earning enough to be eligible for benefits when you’re older.

For this to happen, you must accumulate 40 lifetime work credits. And you can only earn up to four per year.

The value of a work credit is currently $1,730. But in 2025, you will most likely have to earn more than that for a single loan. So if you’re a part-time worker trying to qualify for Social Security, pay attention to what the credit-earnings requirement becomes. You may need to increase your hours to make sure you get the four credits you’re looking for next year.

The changes that apply to social security in the new year will not only affect pensioners. They have the potential to affect many workers as well. For this reason, it’s important to pay attention to what’s happening with Social Security so you can adjust accordingly.