The Social Security Administration (SSA) has announced a 2.5% cost-of-living adjustment (COLA) for 2025, based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This slight increase, although lower than the 2.6% average over the last decade, will still affect many aspects of Social Security, including benefit amounts, taxable earnings limits, and disability thresholds.
Key Changes
Several adjustments will be in effect starting January 2025, impacting beneficiaries and taxpayers alike. Let’s explore the main changes brought by the 2025 COLA.
Taxable Earnings
One of the most significant updates for high earners is the increase in the maximum taxable earnings. In 2025, the ceiling will rise to $176,100, up from $168,000 in 2024. This means that income above $176,100 will not be subject to Social Security taxes. While tax rates remain unchanged—7.65% for employees and 15.30% for self-employed individuals—those earning higher incomes may notice a larger contribution to Social Security.
Work Credits
To qualify for Social Security benefits, workers must accumulate 40 work credits, which equates to about 10 years of work. The threshold for earning one work credit will increase to $1,810 in 2025, compared to $1,730 in 2024. This change reflects a higher bar for earning credits, aligning with the general cost-of-living adjustments.
Retirement Earnings Test
The Retirement Earnings Test Exempt Amounts have also been updated for 2025. This test applies to individuals who choose to collect benefits before reaching their Full Retirement Age (FRA):
- Annual Limit Under FRA: The new limit will be $23,400, an increase from $22,320 in 2024.
- Annual Limit in the Year FRA is Reached: For those who reach FRA during 2025, the earnings limit will be $62,160, up from $60,000.
These limits determine how much a person can earn before Social Security benefits are temporarily reduced. Exceeding these limits may result in benefits being withheld until the individual reaches FRA.
Disability Thresholds
The COLA increase extends to Social Security Disability Insurance (SSDI) thresholds. The Substantial Gainful Activity (SGA) limits, which determine eligibility for disability benefits, have been raised:
| Category | 2024 Amount | 2025 Amount |
|---|---|---|
| Non-Blind SGA | $1,470/mo | $1,620/mo |
| Blind SGA | $2,590/mo | $2,700/mo |
| Trial Work Period | $1,050/mo | $1,160/mo |
These new thresholds aim to account for inflation, ensuring that beneficiaries can earn more without risking their eligibility for disability benefits.
(SSI) Updates
The 2025 COLA also brings changes to Supplemental Security Income (SSI), which provides benefits to low-income individuals who are elderly, blind, or disabled. Here are the updated amounts:
- Single Beneficiary Maximum Payment: $967 per month.
- Married Couple Maximum Payment: $1,450 per month.
- Resource Limits: $2,000 for individuals and $3,000 for couples.
- Student Income Exclusion: Monthly exclusion of $2,350 and an annual limit of $9,460.
These adjustments aim to better support low-income recipients and encourage work for disabled students.
Maximum Benefit Increases
With the COLA adjustment, the maximum Social Security benefit at Full Retirement Age will rise from $3,822 in 2024 to $4,018 in 2025. This higher monthly benefit reflects the efforts to keep pace with inflation. Additionally, delaying benefits until age 70 could further increase payments to $5,108, up from $4,873.
FAQs
How much is the 2025 COLA?
The 2025 COLA is 2.5%.
What is the new taxable earnings limit?
It increases to $176,100 in 2025.
How are work credits earned?
In 2025, one credit requires $1,810 in earnings.
What is the new SGA for non-blind?
It will be $1,620 per month in 2025.
How much is the maximum benefit at FRA?
It will be $4,018 per month in 2025.
