If you're getting close to retirement, you should be keeping up with Social Security developments. And even if you're decades from retiring, it's smart to start thinking of how to prepare for retirement -- because the earlier you start saving and investing, the more you can amass.
The more you know, the better you can plan. For example, know not to expect too much. The overall average monthly Social Security retirement benefit was $1,922 as of September. That's about $23,000 annually.
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Here are some more important things to know about Social Security for 2025.
1. Social Security recipients will get bigger benefits
Retirees are often considered to be living on fixed incomes, but Social Security benefits are not fixed. They're increased in most years, via cost of living adjustments (COLAs), which helps retirees keep up with inflation. The latest COLA taking effect in 2025 is 2.5% -- fairly close to the 2.6% average annual increase over the past two decades.
There are things you can do to increase your future benefits -- and choosing the best age at which to claim your benefits is one of them. (The best age to claim benefits is 70, for most people.)
One perk of maximizing your benefits is that you'll be maximizing your COLAs, too.
2. The maximum benefit is increasing
Not only will all retirement benefits increase in 2025, but the maximum monthly benefit will increase, too -- from $4,873 to $5,108. The new maximum is set to deliver about $61,300 annually, which should sound way better than $23,000.
But there's a catch -- hardly anyone will qualify for it. That's because to qualify, you'll need to:
- Earn at least the maximum income that counts in Social Security calculations -- which will be $176,100 for 2025 and has been similarly steep in past years.
- Earn at least that maximum for at least 35 years.
- Delay collecting your benefit until age 70.
See? It's close to impossible to achieve the maximum benefit.
3. High earners will pay more in Social Security taxes
That necessary earning threshold of $176,100 needed to qualify for the maximum retirement benefit is also the maximum amount of earnings that gets taxed for Social Security. It means that if you earn, say, $50,000, all your income is taxable by Social Security. If you earn $176,100, it's the same. But if you earn, say, $25,176,100, only your first $176,100 of earnings is taxed, and the remaining $25 million is not.
Many see this as unfair, when most people get taxed on all their income for Social Security while others are only taxed on a portion of their income. Some suggest removing this taxation cap, which will generate more needed income into Social Security's coffers.
4. The Social Security surplus is getting closer to running out
Speaking of Social Security's coffers, they're actually shrinking. That doesn't mean the program will run out of money and be unable to pay beneficiaries -- because as long as people are working and being taxed for Social Security, there will be money coming in that can be used to pay benefits.
The problem is that until recently, more was taken in than paid out, creating a surplus. But with many people living longer and retiring earlier, the ratio of workers to beneficiaries has been shrinking. We've now been tapping that surplus, and it's estimated that, per the 2024 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance trust fund, "reserves will be depleted in 2035."
Retirees won't have all benefits shut off then, but if nothing is done to strengthen Social Security, come 2035, beneficiaries will receive only 83% of what they're due. Fortunately, there are ways to shore up the program, should Congress decide to act.
This last issue alone is a good reason to keep up with Social Security developments, as they could influence your retirement plan.
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