Social Security has been an active part of the lives of millions of Americans for nine decades. Since it was implemented, it has undergone major reforms and now, in 2025, it promises changes that will affect thousands and thousands of families in our country. Two major changes are about to transform the way Americans receive their benefits (whether retirement or other payments). So, here we are going to explain what these two updates are and how to prepare for them to positively affect our lives.
The increase you will notice on your bill.
Let’s start, at least, with good news. This increase we are talking about is called COLA (Cost of Living Adjustment), and it means that the administration increases the payment you make by a small amount to alleviate the problems derived from inflation, that is, by 2025, this increase is projected to be 2.5% in each monthly payment. This measure, which seems insignificant at first glance, represents a great relief for many beneficiaries. We leave you an example so that you understand that this adjustment is no small thing: A beneficiary who currently receives $1,500 per month could go on to receive approximately $1,538, and, on the other hand, for those who receive $2,000, the increase would be an additional $50.
This adjustment does not affect all beneficiaries (disabled, retirees, and SSI beneficiaries) equally, and they will receive the increase depending on their base benefits.
Here’s how it works
the COLA is directly tied to inflation, and while many people find the adjustment for 2025 insignificant after being at 5.9% in other years, this adjustment tries to alleviate the effects of said process (inflation) on basic goods (food, housing, and health insurance). So, however small, it will help families carry the burden of the shopping cart a little bit lighter.
And remember, there were many years (when there was no inflation, of course) when beneficiaries did not see their payments increased by any adjustment (such as in 2010 and up to 2016).
Retirement Age Changes
Another significant change coming in 2025 is the change in the retirement age, and no, we’re not going to like this one all that much. The SSA has set the FRA in 2025 to increase to age 67 for those born in or after 1960.
But, if you choose the early retirement option, you’ll lose 30% of your monthly payments, so it may not pay off to retire early.
- At age 62: $1,200 per month.
- At age 67 and 6 months: $1,700 per month.
- At age 70: $2,040 per month.
The silver lining is that, upon reaching early retirement age, the Social Security earnings test no longer applies, and any benefits withheld because of it are not lost either.
FAQs about changings
- When will the 2025 COLA adjustment take effect? The adjustment will take effect with payments issued beginning in January 2025.
- How do I know if I’m affected by the FRA change? If you were born in 1960 or later, your Full Retirement Age will be 67 years and 6 months.
- What happens if I claim benefits before FRA? Your monthly payments will be reduced, and you may lose up to 30%.
- Does the COLA adjustment apply to all beneficiaries? Yes, but the impact varies depending on the type of benefits you receive.
- Where can I find more information? Visit the official Social Security Administration (SSA) website for more details.
What mistakes should I avoid when planning my retirement?
We know that planning for retirement can be complicated, so here are some tips to help you better assess your situation.
- Don’t plan your future based on current expenses, always save some of your money for possible health care costs that may occur
- Don’t claim your retirement early, you’ve already seen that your money could be reduced by 30%, and yet, waiting until you’re 70 will result in an additional 8%.
- Periodically review your income history to make sure that all your information is correct
- Remember that inflation exists and will directly impact your purchasing power, so don’t leave it out of the equation and remember that what you buy for $1 today, tomorrow can cost $4!