If you rely on Social Security or Medicare, 2025 is bringing some important changes that could affect your monthly benefits and healthcare costs. Whether you’re currently receiving benefits or planning for retirement, staying informed is key to making the right financial decisions.
Social Security: What’s Changing?
Cost-of-Living Adjustment (COLA): Good news—Social Security checks will get a boost in 2025! Benefits will increase by 2.5%, thanks to the annual cost-of-living adjustment (COLA). While this is lower than previous years, it still means the average retiree will see an extra $49 per month, bringing the typical monthly payment to $1,976.
Retirement Age is Going Up
For those planning to claim Social Security soon, there’s a slight change to the Full Retirement Age (FRA). If you were born between May 2, 1958, and February 28, 1959, your FRA will be 66 years and 10 months. Claiming benefits before this age will still result in reduced payments.
Higher Taxable Earnings & Work Limits
- The maximum amount of earnings subject to Social Security tax is increasing to $176,100 (up from $168,600 in 2024).
- To earn a Social Security credit, you’ll need to make at least $1,810 per credit. You can earn up to four credits per year by reaching $7,240 in annual income.
Medicare: What You’ll Pay in 2025
If you’re on Medicare Part B, expect a higher monthly premium. In 2025, the standard premium is rising to $185 per month, up from $174.70 in 2024. This increase is due to rising healthcare costs.
The annual deductible for Part B is also increasing, now at $257. If you have Medicare Part A, the hospital deductible will now be $1,676 per benefit period.
Major Relief for Prescription Drug Costs
One of the biggest changes in 2025 is the introduction of a $2,000 cap on out-of-pocket prescription drug costs under Medicare Part D. This means you’ll no longer pay more than $2,000 per year for medications, which is great news for seniors struggling with high drug prices.
Additionally, a new Medicare Prescription Payment Plan will let you spread out your prescription costs over the year instead of paying large amounts upfront.
Big News: Social Security Fairness Act Signed into Law
In a major win for public-sector workers, President Joe Biden signed the Social Security Fairness Act in January 2025. This law eliminates two rules that previously reduced Social Security benefits for workers receiving government pensions:
- The Windfall Elimination Provision (WEP)
- The Government Pension Offset (GPO)
This change means over 2.65 million public servants—including teachers, police officers, and firefighters—will now receive higher Social Security payments. The law is retroactive to January 2024, so many people could see increased payments right away.
What This Means for You
While the COLA increase is a positive change, rising Medicare premiums could eat into those extra dollars. However, the new $2,000 prescription drug cap will be a major relief for seniors with high medication costs.
For public-sector retirees, the Social Security Fairness Act is a game-changer, restoring benefits that were previously reduced or eliminated.
What You Should Do Now
- Check Your Benefits Statement: Log in to your Social Security and Medicare accounts to see how these changes will affect your benefits.
- Review Your Medicare Plan: If you have high prescription drug costs, consider enrolling in the new Medicare Prescription Payment Plan to spread out expenses.
- Stay Informed: More changes could be coming in 2025, so keep an eye on official updates from Social Security and Medicare.
With these updates in mind, now is the time to plan ahead to make the most of your retirement benefits in 2025 and beyond!
