Social Security Trends for 2025
While it’s always challenging to predict, every New Year, brings various changes to Social Security benefits to the estimated 21.7 million people that need the added financial cushion the most. Social Security has been constantly evolving over the past eight decades. And this is why we are tracking the biggest changes for 2025.
There are several key developments likely to shape the program’s future based on current policy discussions, demographic shifts, and economic conditions. Here are some of the most important trends to watch for Social Security in 2025:
Exploring the top 2025 Trends for Social Security:
- Social Security Beneficiaries Gain COLA Increase
For 2025, the Social Security Administration (SSA) announced those receiving Social Security benefits, such as Social Security Disability Insurance (SSDI), will get a 2.5% increase cost-of-living adjustment (COLA) increase. These alterations help beneficiaries with living costs and overall inflation. The average monthly $1,927 benefit will now rise to $1,976. Earnings limitations for workers who are younger than “full” retirement age (see Full Retirement Age Chart) will increase to $23,400, while the earnings limit for people reaching their “full” retirement age in 2025 will increase to $62,160. In our recent article, we explain how you can check your COLA notice.
- Medicare Premiums Rise
Monthly Medicare Part B premiums cover doctor visits and outpatient treatments, are deducted directly out of Social Security checks. In 2025, these standard premiums are rising by $10.30 to $184 a month. Administered by entirely separate federal agencies, Social Security and Medicare are entirely separate programs with separate rules and regulations regarding their benefit and payment structures. Meaning, the Part B Medicare premium increase has nothing to do with the Social Security COLA. By law it must be set at a level that covers 25% of the cost of running the program, while taxpayers pick up the remaining 75%.
Part B deductibles will also increase to $257 in 2025, a $17 growth from the $240 annual deductible for 2024. Medicare Part B premiums are based on a beneficiary’s modified adjusted gross income (MAGI), from their tax returns from two years prior.
- Medicare Prescription Drug Cap
The Inflation Reduction Act, or drug law, will now be capped at $2,000, as changes go into effect for annual out-of-pocket Medicare Part D drug costs. Recipients with Medicare Part D drug plans that have a deductible pay out-of-pocket costs until that threshold is met. The highest deductible for those plans in 2025 is now $590. After beneficiaries reach their full deductible, they will owe 25% of the cost of coinsurance until their out-of-pocket spending on both generic and brand-name drugs reaches $2,000. After that, those receivers will have “catastrophic coverage,” meaning they don’t have to pay out-of-pocket Part D costs for the rest of 2025.
- Possible Pension Increase
Nearly 2.8 million beneficiaries have been affected by Congress repealing the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which ended policies that for more than four decades reduced benefits for people qualifing for both Social Security and a pension from a “non-covered” job where they did not pay into Social Security via FICA withholding from their paychecks. Those who receive pensions work in federal, state and local government, or in public service jobs such as teachers, firefighters and police officers.
The Social Security Fairness Act eradicates two provisions that reduce Social Security benefits for those individuals who also have pension income from public work where Social Security payroll taxes were not paid. This includes the Windfall Elimination Provision WEP, which reduces Social Security benefits for individuals who also receive pension or disability benefits from employers who did not withhold Social Security taxes. Those affected will receive a lump-sum repayment for their WEP or GPO withholding last year.
- Social Security Taxes Escalate
Although Social Security is funded by 12.4 % payroll tax on workers’ earnings, incoming revenue is not sufficient to cover projected benefits. Without Social Security taxes, the program wouldn’t exist, so each year a new wage cap determines how much income is taxed. Employers and employees are withheld 6.2% (through FICA). In 2025, taxes on work income up to $176,100 (up from $168,600 in 2024) must be paid. Any earnings above that threshold are not taxed for the purpose of funding Social Security, nor is any income from investments.
- Higher Earning Limits
You’re allowed to earn money from a job, which is why It’s common to work while collecting Social Security benefits. The Social Security Administration (SSA) created the earnings test to monitor whether beneficiaries have reached full retirement age. People who collect retirement, survivor, or family benefits before reaching this milestone and continue to work may temporarily lose a portion of their Social Security benefits allowance if their earnings exceed a certain level. Changing annually, the 2025 earnings test limits are increasing from $22,320 to $23,400. From there, $1 in Social Security benefits will be withheld per $2 of earnings, easing when you reach full retirement.
However, different income rules apply for people receiving Social Security Disability Insurance (SSDI). Disability benefits are intended for people who are largely unable to work for an extended period due to a serious medical condition, so you can lose them if your earnings reflect what the SSA calls “substantial gainful activity.”
- Full Retirement Age Gets Pushed Back
If you’re thinking of retiring, you may have to wait a little longer to reach full retirement age (FRA). For years the retirement age was set at 65; however, in 1983 Congress passed a law to progressively raise the age until it climbs to 67. In 2025 two months gets added to FRA, or 66 and 10 months old for those born in 1959. If you were born in 1960 or later, your FRA is 67, which you will reach in 2026. According to the Social Security Administration, “if you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase,” the agency notes. Taking early retirement actually reduces your benefit amount. On the contrary, if you delay taking benefits beyond your FRA age and continue working, you can potentially increase future Social Security benefits.
In all, there are some possible changes to how your Social Security benefits could be affected in 2025. Lowery Law Group will continue to bring the latest updated Social Security news. We’re committed to helping you through these complexities of these potential alterations. We stand ready to help secure the benefits you need and deserve. Contact us at info@lowerylegal.com or call (843) 991-0733. There is no fee for a free consultation regarding your claim.