For those collecting Social Security or nearing retirement, cost-of-living adjustments (COLAs) are a major concern since they affect seniors’ purchasing power each year.
In 2025, recipients received a 2.5% COLA, which was the smallest increase in years, leaving many disappointed.
However, a positive change in 2025 allowed seniors to increase their retirement income: the earnings test limits were raised.
The general earnings test limit is now set at $23,400, up from $22,320 in 2024. If earnings exceed this amount, $1 in Social Security will be withheld for every $2 earned.
For those who are approaching full retirement age this year, the earnings test limit is even higher at $62,160, compared to $59,520 in 2024, with $1 withheld for every $3 earned over this limit.
A survey conducted in late 2024 found that 13% of retired seniors planned to work in 2025, primarily due to rising living costs, but many were also seeking to combat boredom, reported Nasdaq.
Once individuals reach their Full Retirement Age (FRA), they can earn any amount without impacting their Social Security benefits. However, they must follow the earnings test limit if they are earning income before hitting that age. Exceeding this limit can lead to a temporary withholding of benefits.
If you were born in 1958, your FRA is 66 years and 8 months. For those born in 1959, the FRA is 66 years and 10 months. If you were born in 1960 or later, the FRA is 67 years.
While benefits can be initiated at 62, doing so will result in a reduced payout. Specialists advise delaying until age 70 to receive the highest possible benefits, reported Investopedia.
If you begin receiving Social Security benefits before your FRA, your monthly benefit will be reduced by up to 30%, depending on how many years before your FRA you start claiming.
Conversely, if you delay benefits until after your FRA, your benefit will increase by 8% per year until you turn 70. This means waiting could result in a 32% higher monthly benefit by age 70 compared to claiming at FRA.
The increased earnings test limits are a significant update for anyone collecting Social Security and considering working or already working part-time. This change is also relevant for those about to retire who plan to combine work with Social Security benefits before reaching their full retirement age.