Title: Anticipated Social Security Boost for Certain Workers in 2025 Due to this Adjustment
Many senior Social Security beneficiaries were disappointed by the 2.5% cost-of-living adjustment (COLA) for 2025, as it only added an extra $49 to the average monthly check. With most U.S. seniors relying on their savings or other government benefits to make ends meet, any additional income is welcomed, particularly for those affected by the Social Security earnings test limits.
Luckily, there's one group of seniors who could see an extra financial boost in 2025. Americans who start collecting Social Security retirement benefits at 62 but continue working may face the Social Security earnings test. This means that if they earn more than a specific amount during the year, a portion of their benefit checks will be withheld.
For those who claimed their benefits before their full retirement age (FRA) in 2024, the earnings test limits were:
- If under FRA all year: A $1 reduction for every $2 earned over $22,320.
- If reaching FRA in 2024: A $1 reduction for every $3 earned over $59,520 if earnings reached that level before your birthday.
However, good news is on the horizon for 2025. The earnings test limits have been increased to:
- If under FRA: A $1 reduction for every $2 earned over $23,400.
- If reaching FRA in 2025: A $1 reduction for every $3 earned over $62,160 if earnings reached that level before your birthday.
This means that beneficiaries who claim their benefits before their full retirement age can now earn more money before the Social Security Administration starts holding anything back from their checks. Individuals earning more than $23,400 who are under their FRA in both years will save $540 compared to 2024.
Moreover, those reaching their FRA could see an even bigger increase in benefits. Money withheld due to the earnings test isn't lost forever. Once you reach your full retirement age, the agency recalculates your benefit and gives it a boost if it previously withheld money due to the earnings test.
Unfortunately, there's no one-size-fits-all answer to how much of an increase you can expect when reaching your FRA, as it depends on how much was withheld in the past. Contact the Social Security Administration for personalized advice, and they can help you calculate your individual gains. Keep in mind that earnings test limits generally go up annually, so you may have even less withheld in the future.
With the increase in the earnings test limits for 2025, senior Social Security beneficiaries who start collecting retirement benefits early can potentially have more money in their pockets. For instance, individuals earning over $23,400 before their full retirement age will save $540 compared to 2024. Furthermore, once they reach their full retirement age, any money withheld due to the earnings test will be recalculated and added to their benefits.
