Millions of Social Security recipients will benefit from the 2.5% cost of living adjustment for 2025, set to take effect in January.

With this increase, the maximum Social Security benefit for a worker retiring at full retirement age will rise to $4,018 per month from $3,822 per month this year, according to the Social Security Administration.

But while those maximum benefits increase by $196 per month, retirement benefits increase by about $50 per month on average, according to the agency.

According to the Social Security Administration, the average monthly benefit for retired workers is expected to rise to $1,976 per month in 2025, an increase of $49 from $1,927 per month this year.

According to Paul Van de Water, senior fellow at the Center on Budget and Policy Priorities, in general, the highest Social Security benefits will go to people who have earned maximum earnings throughout their careers.

That cohort generally includes a “very small number of people,” he said.

Because Social Security retirement benefits are calculated based on the highest 35 years of earnings, employees must consistently earn wages up to this threshold to receive the maximum retirement benefit.

“Very few people start at 21 and earn at the top level,” Van de Water said.

Employees pay wage tax to social security up to a so-called taxable maximum amount.

In 2024, income up to $168,600 will be subject to a 6.2% tax paid by both employees and employers – or 12.4% for self-employed people. In 2025, this value will rise to $176,100.

Specifically, this limit only applies to wages subject to federal payroll tax. If a wealthy person has other sources of income, such as from investments that don’t incur payroll tax contributions, that doesn’t affect the amount of their Social Security benefits, said Jim Blair, vice president of Premier Social Security Consulting and a former Social Security administrator.

Blair said there are beneficiaries who receive Social Security checks of more than $4,000 a month and typically wait until age 70 to claim.

“Technically, you get the most Social Security benefits if you wait until age 70,” Blair said.

By drawing the old-age pension at the earliest possible age, namely at 62, those entitled receive permanently reduced benefits.

At full retirement age – 66 or 67 depending on date of birth – pensioners receive 100% of the benefits earned.

If beneficiaries wait until age 70 from full retirement age, they can receive a benefit increase of 8% per year.

By waiting from age 62 to age 70, beneficiaries can see a 77% increase in benefits.

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However, because everyone’s circumstances are different, it may not always make sense to wait until the highest possible eligibility age, Blair said.

Potential beneficiaries must consider not only the impact their application decision will have on them personally, but also on their spouse and any dependents, he said.

“You need to look at your own situation before you apply,” Blair said.

It’s also important for potential benefit recipients to set up a My Social Security account online to check their benefit statements, he said. This shows estimates of future performance and the earnings history recorded by the agency.

Because this earnings information is used to calculate benefits, individuals should double-check this information to ensure it is accurate, Blair said. If not, they should contact the Social Security Administration to resolve the issue.