For millions of Americans, one of the biggest financial questions remains how is social security calculated as they prepare for retirement. The Social Security Administration (SSA) has not yet released new updates for 2025 benefits, meaning there is currently no available data regarding changes to cost-of-living adjustments (COLA), taxable wage limits, or updated bend points beyond the 2024 figures. This lack of new information makes it essential to understand how the calculation works today and how it impacts your future income planning.
Status of Social Security in 2025
At this point in August 2025, there are no official updates from the SSA about COLA or adjustments for the new year. Typically, announcements regarding the cost-of-living adjustment are made in October based on inflation data through September. Until then, retirees and future beneficiaries continue to rely on 2024’s figures to estimate payments.
- The 2024 COLA increase was 3.2%.
- The maximum taxable earnings cap stood at $168,600.
- The earnings limit for early retirees was $22,320.
- The earnings limit in the year of full retirement age was 59,520.59,520.
Unless updated numbers are provided later in fall 2025, these remain the latest benchmarks.
How Social Security Benefits Are Calculated
To fully understand how your benefit is determined, you need to know the three-step calculation process used by the SSA.
- Average Indexed Monthly Earnings (AIME): Your work history is reviewed to find your highest 35 years of earnings. Those years are adjusted for inflation, and then monthly averages are determined.
- Primary Insurance Amount (PIA): This is the baseline benefit you are entitled to at full retirement age. It is calculated using a percentage formula applied at certain “bend points,” which adjust each year based on wage growth. For 2024, the formula was:
- 90% of the first $1,174 of AIME
- 32% of AIME between 1,174and1,174and7,078
- 15% of AIME above $7,078
- Adjusted for Claiming Age: Benefits change depending on when you begin collecting them. Taking benefits as early as 62 reduces the monthly amount, while waiting past full retirement age (up to 70) adds delayed retirement credits.
Why Claiming Age Matters
When to claim your benefits continues to be one of the most important choices. For example:
- Claiming early at 62: A reduction of up to 30% compared with full retirement benefits.
- Claiming at full retirement age (67 for those born in 1960 or later): You receive your full calculated PIA.
- Delaying until 70: Provides an increase of about 8% for every year past full retirement age.
This flexibility makes Social Security a personal decision, guided by financial needs, health outlook, and long-term retirement planning.
What Workers and Retirees Should Watch in 2025
Since no official updates are yet available for 2025, here are the key areas to monitor in the coming months:
- October 2025 Announcement: SSA is expected to announce the COLA adjustment for 2026 based on inflation reports.
- Wage Base Adjustments: Workers earning close to or above the taxable maximum may see changes in payroll deductions once new earnings caps are confirmed.
- Program Funding Debates: Policymakers continue discussing possible long-term changes, but no official structural reforms have been adopted to date.
Until these figures are updated, people should continue to use the 2024 values as a planning guide.
Easily Tracking Your Benefits
The SSA encourages current workers and retirees to log in to their my Social Security accounts online. With this tool, you can:
- Review your earnings history for accuracy.
- Estimate benefits at different claiming ages.
- Explore spousal or survivor benefit eligibility.
- Understand how working during retirement could affect your payments.
This personalized data helps you stay on top of retirement planning while awaiting updates later in 2025.
Final Thoughts
Understanding how Social Security is calculated is crucial, especially during a time when updates for 2025 have not yet been released. While we wait for new figures on COLA, taxable wage limits, and bend points, retirees and workers can still map out their options using the latest available numbers from 2024. As soon as announcements are made, those updates will clarify what next year’s payments look like.
What do you think about the current uncertainty around Social Security updates? Share your views below—we’d love to hear your thoughts.