Social Security’s cost-of-living adjustment for 2024 was disappointing for many seniors. It added just $49 to the average monthly check, which is not enough for a lot of households. Most U.S. seniors will have to look to their savings or other government benefits if their Social Security benefits don’t stretch far enough.
However, there is one group of seniors that could get an extra boost in 2025. The difference probably won’t be life-changing, but even a little extra cash could make life more comfortable. For Americans who become eligible to start collecting Social Security retirement benefits as soon as they turn 62, there are some drawbacks to claiming them early, including a reduction in their monthly benefits.
One significant consideration is the Social Security earnings test. If you earn more than a certain amount during the year while collecting benefits before reaching your full retirement age (FRA), which is between 66 and 67 depending on your birth year, the program begins to withhold some money from your benefit checks. In 2024, if you were a beneficiary under your FRA all year, $1 was cut from your benefits for every $2 you earned over $22,320.
If you reached your FRA in 2024, $1 was withheld for every $3 you earned over $59,520.
Earnings limits raise for 2025
These limits have been raised for 2025 to $23,400 and $62,160, respectively.
This means workers who have claimed Social Security prior to reaching their FRA will be able to make more money before the Social Security Administration starts withholding anything from their checks. For instance, those earning more than $23,400 who are under their FRA both years will hold onto an extra $540 this year compared to 2024. Moreover, money withheld due to the earnings test isn’t gone forever.
Once you reach your FRA, the agency recalculates your benefit and gives it a boost if it previously withheld money due to the earnings test. So those reaching their FRA this year could see a larger boost at this time. After reaching FRA, beneficiaries are no longer subject to having money withheld due to the earnings test, regardless of other income sources.
It is difficult to make a general statement about the potential increase a beneficiary can expect upon reaching FRA, as it depends on individual circumstances and how much the government withheld in the past. Beneficiaries curious about their individual situations should contact the Social Security Administration for personalized advice. It’s also important to note that earnings test limits generally go up annually.
Therefore, it’s possible that in subsequent years, even less may be withheld due to these limits, which is something to consider when preparing future budgets.