If you intend to retire soon, you should consider creating a retirement income plan. Social Security will play an important role in this plan for many segments of society, thus staying up to date on the newest benefits information is critical.
The Social Security Administration (SSA) has just revealed numerous key changes to the 2025 program, including its yearly COLA (cost of living adjustment). Below are some essential changes to Social Security points that will take effect next year, and this is all you need to know to stay up to date.
The 5 changes in Social Security in 2024
With almost 72.5 million people relying on Social Security’s benefit programs, annual modifications to the program and its payouts are always eagerly anticipated.
The COLA adjustment for this year’s cost of living is lower than the previous 3.2% increase. Any additional wage is welcome relief for those who live on a fixed income. If you need help developing a retirement income plan, you should consult with a financial expert.
COLA still rises
The Social Security Administration has declared that benefit checks will increase by 2.5% in 2025. The 2.5% change will result in a $50 boost in each monthly benefit for those who are retired on Social Security beginning in January.
If we examine, the average check for retired workers will increase from $1,927 to $1,976. In fact, for a marriage with both parties receiving benefits, the expected payout will be increased from $3,014 to $3,089.
Since 1975, the SSA has linked COLA adjustments to the Consumer Price Index for Urban Wage Clerical Workers (CPI-W) and Earners. To define the COLA, the SSA compares the third-quarter CPI-W of the previous year to the third-quarter CPI-W of the current year. The COLA is then modified to reflect the percentage change in CPI-W from one year to the next.
Increase in maximum taxable earnings
In 2024, the maximum earnings subject to Social Security taxes were $168,600. This demonstrates that workers who contribute to the system are required on wages up to this amount—typically at a rate of 6.2%.
Over the coming year, the top profits will increase to $176,100. This reflects the fact that the worker’s income will be subject to tax. This change is due to an increase in the average wage in the United States.
Maximum Social Security convenience is about to increase too
For a worker retiring at full retirement age, the maximum Social Security income will increase from $3,822 in 2024 to $4,018 the following year. This maximum applies to workers who retire at the full retirement age—those born after 1960 and turning 67 after this year. The maximum payment will be decreased for people who retire before the full retirement age.
The average benefit for spouses and disabled workers is also increasing.
The average income will improve across the board during the next year, implying benefits for those in more challenging situations—such as widows, widowers, and the disabled. These average and individual scenarios may differ.
Social Security adjusts the amounts exempted from the income test
If you receive Social Security retirement benefits before reaching the appropriate retirement age, your payments will be retired if your income exceeds the restrictions. This is known as the retirement earnings text, and it can take a significant portion of your income if you are still working. In the coming year, the retirement earning test free amount will be as follows:
If you begin receiving Social Security before reaching the statutory retirement age, you can earn up to $1,950 per month in 2025 before the SSA begins withholding benefits.
By the time you reach the official retirement age, this restriction still applies, but only until the month you reach the full age. In 2025, you can earn up to $5,180 per month before wages are withheld, at the cost of $1 in benefits for every $3 earned above the maximum (rather than $2).
The last conclusion
In 2025, Social Security COLA provides pensioners and others with an increase in their payments. Nevertheless, this will not be the only change to the program. Other levels and aspects have also been considered and updated in order to remain mindful of the continuance of cost rises.
Also See:- Social Security payments with 2025 COLA: dates and requirements to get retirement benefits