For the past 90 years, Social Security has been a financial lifesaver for millions of retired Americans. Whether it accounts for a small portion, most, or all of their benefits, there’s no denying its importance.
However, the program can sometimes be difficult to understand, especially with all the constant changes. As we move through the second half of the year, here are three key updates that could affect your Social Security benefits in 2025.
1. The Full Retirement Age Has Increased by Two Months
Your full retirement age (FRA) is the age at which you become eligible to receive your full Social Security benefits, known as the primary insurance amount (PIA). For people born in 1959, the FRA has increased to 66 years and 10 months, up from 66 years for those born in 1958.
Understanding your FRA is essential because the timing of your claim affects the amount of benefits you receive. If you claim benefits before reaching your FRA, your monthly benefit will be reduced by five-ninths of 1% for each month you file early, up to 36 months. After that, the reduction becomes five-twelfths of 1% per month.
For example:
If your FRA is 66 and 10 months and you claim at 62, your benefits will be reduced by about 29.17%.
If you claim at 64, your reduction will be about 18.9%.
On the flip side, delaying your benefits past your FRA will result in an increase of two-thirds of 1% per month (8% annually) until you turn 70. This gives individuals with an FRA of 66 years and 10 months an opportunity to boost their benefits by up to 25.3%.
2. Some People Will Pay More in Social Security Payroll Taxes
To receive Social Security benefits, you need to pay into the system through payroll taxes. The total Social Security tax rate is 12.4%, split equally between employers and employees (6.2% each).
Self-employed individuals pay the full 12.4%. However, not all of your income is subject to Social Security taxes; only income up to a specific limit is taxed, known as the “wage base limit.”
In 2025, the wage base limit increases to $176,100, up from $168,600 in 2024. This means some people will pay more in Social Security payroll taxes, as a larger portion of their income becomes subject to taxation.
For example:
If you earned $176,000 in 2024, $7,400 of your income was exempt from Social Security taxes.
If you earn $176,000 in 2025, every dollar of that income will be taxed.
The wage base limit changes periodically, so it’s essential to stay updated to know how much you could be paying in taxes.
3. You Can Earn More Money This Year While Claiming Benefits Early
If you claim Social Security benefits before your FRA, you’ll be subject to the retirement earnings test (RET), which limits how much you can earn without reducing your benefits. In 2025, the earnings limit has increased to $23,400, up from $22,320 in 2024.
Earning more than this amount will result in a reduction of $1 for every $2 you earn over the limit.
For those who reach their FRA in 2025, the earnings limit is $62,160, up from $59,520 in 2024. If you earn more than that amount, your benefits will be reduced by $1 for every $3 you earn above the threshold.
The good news is that any reduced benefits are not permanently lost. Once you reach your FRA, Social Security will recalculate your benefits and gradually restore the withheld amount over your lifetime.
The $23,760 Social Security Bonus Most Retirees Completely Overlook
If you’re behind on retirement savings, there are several little-known Social Security strategies that could help boost your retirement income. Understanding these “Social Security secrets” could provide you with an additional $23,760, ensuring a more comfortable retirement.
Keep an eye on these changes and plan your Social Security strategy wisely to make the most of your benefits.
