You can tell that the rest of the year is going to go by quickly in the fall, since the holidays are coming up quickly. Before the holidays start, it’s smart to take care of your money. For retirees, it’s even more important to know how the changes will affect their Social Security payments.
There are going to be big changes coming to Social Security soon that will help you plan your finances better for the future. Social Security is a very flexible scheme that changes every year or two. That was the case in 2025 and it will stay that way. This year, the cost-of-living adjustment (COLA) is likely to be the most important change to Social Security payments. However, it’s not the only one.
Everything about Social Security benefits will change in 2025
Beneficiaries will need to pay higher taxes on income
The highest amount of money that was taxed by Social Security went up from $160,200 to $168,600 in 2024. Some wealthy Americans have already felt the effects because they have crossed the barrier. Others will as the year goes on.
This doesn’t officially change Social Security payments, but it does change how much money some workers make. In 2024, the highest amount of Social Security tax that can be paid is $168,600. However, this amount is tied to inflation, so you can bet that it will go up in 2025. If you make more than that next year, you will have to pay more in taxes.
Social Security to modify overpayment policies
The Social Security Administration (SSA) recently changed the rules after getting bad feedback last year about how it handled giving people too much money. The government wants to make it easier for people to get overpaid and help Social Security users save money in three ways:
- Reduced repayment: Beginning March 25, the Social Security Administration will deduct an overpayment of the greater of $10 or 10% from a beneficiary’s Social Security benefits. This is much less than the previous 100%. Certain cases will be exempt, such as those where fraud resulted in an overpayment.
- Extended recovery period: SSA will grant a beneficiary’s request for a rate less than 10% if the new rate will repay the overpayment in 60 months, instead of the previous 36 months.
- Streamlined appeals process: If a Social Security beneficiary believes they have been overpaid and cannot pay it back, they can appeal the overpayment determination and/or the amount and ask SSA to waive collection. They don’t have to pay back anything while the waiver is in effect. SSA has also created new, more reasonable repayment options.
New spousal Social Security benefits rule
A long-standing part of Social Security’s partner benefits ends this year for everyone except people who turn 70 on January 1, 2024. The law lets recipients switch between their own benefits and their spouse’s benefits so that they can get the most money.
That being said, if you were not born before January 1, 1954, you cannot get Social Security payments. When both spouses hit full retirement age, the spouse who makes more would get spousal benefits, and the other would get their own benefit under the old rule, which is no longer in effect.
Because of delayed retirement credits, the person who made more would start getting benefits at age 70, which is when Social Security payments are at their highest. The spouse who makes less could also choose to keep their Social Security payments or get a spousal benefit, depending on which is higher.
New cost of living adjustment (COLA) announcement
The Social Security Administration says that retirees will get an average of $1,864.52 in Social Security payments in March 2024. This is because the cost of living has gone up by 3.2% this year.
It is still higher than the average of 2.6% over the last 20 years, but it is almost two-thirds less than the rise from last year. Everyone who gets Social Security benefits will be affected, but the amount will depend on things like the type of benefit you get and when you asked for it.
The cost of living adjustment (COLA) is likely to go down after 2024. Based on Kiplinger’s research, the COLA for 2025 is expected to be 2.57%, which is almost a full percentage point less than this year’s rate. Inflation is slightly lower, but that doesn’t mean that food prices or home prices that are going through the roof will go down any time soon.