Retirees in 2025 will be impacted by confirmed increases—the three main increases in Social Security

Retirees in 2025 will be impacted by confirmed increases—the three main increases in Social Security

Every year, people who get Social Security get an increase from the cost of living adjustment (COLA). But there are other raises that retired workers may not know about. More than 64 million retirees depend on Social Security benefits to pay their monthly bills.

 

This new raise will help them. Find out more about the new rules from the Social Security Administration that will give more money to people who are eligible for retirement benefits next year if you are already getting them or plan to apply soon.

 

The 3 major increases that will impact retirees’ Social Security paychecks in 2025

Retirees will get a boost from the cost of living adjustment (COLA)

The cost-of-living adjustment (COLA) is something that Social Security recipients, especially seniors, look forward to hearing about every year. This number is accurate until October 2024, and it stops being accurate on January 1, 2025.

 

The Social Security Administration uses the COLA to make changes to the benefits it gives based on inflation, which usually means that monthly payments go up.

 

The cost of living adjustment for 2025 has not been publicly announced, but the latest predictions from the Senior Citizens League suggest that it could be anywhere from 2.5% to 3%, with 2.5% being the more likely amount. As of January 2025, seniors would get the following amounts of money if this percentage were to become law:

Retirement benefits Social Security checks 2.5% COLA increase Extra income
On average $1,900 $1,948 $48
Age 62 $2,710 $2,778 $68
Age 67 $3,822 $3,918 $96
Age 70 $4,873 $4,995 $122

Increase in the full retirement age for upcoming retirees

The Full Retirement Age (FRA) is a common way for the Social Security Administration to figure out when you will be able to get all of your benefits. This age goes from 66 to 67 right now, depending on the year you were born. From 2025 on, the FRA will be 66 years and 10 months.

 

This year, the FRA for people under 67 will not be back. People who turn 66 in 2024 will have the same FRA as people who were born in 1958: 66 and 8 months.

 

Also, people born in 1959 who will be 66 next year will have to wait until they are 66 years old and 10 months old to get all of their benefits. By 2026, everyone born after 1960 will have a FRA of 67; no one will be younger.

 

What this means is that you will get all of your Social Security benefits up to that time. At age 62, you can claim earlier, but you will get less money. If you wait until age 70, on the other hand, your monthly benefit will go up by 8%.

Retirees in 2025 will be impacted by confirmed increases—the three main increases in Social Security
Source (Google.com)

Some retirees will have a Social Security tax increase

The federal government sets a limit on how much of your income Social Security taxes. When you leave, this will change how much money you get regularly. Your income in retirement will go up by the same amount as your taxed income. At the moment, the most money that is taxed is $168,600.

 

This number goes up almost every year. In 2023, for example, people who make up to $160,200 a year will only have to pay Social Security taxes on that amount.

 

The Social Security Trustees’ intermediate estimates say that by 2025, the amount of taxes you pay for Social Security will have gone up to $174,900. People who make more than $168,600 a year might have to pay taxes on an extra $6,300.

 

If nothing changes, retirees may face cuts in their monthly benefits

The Committee for a Responsible Federal Budget found that longer retiring ages and a growing top-heavy population in the United States are making it hard to pay for Social Security. Because of this, Social Security is running out of money that it can use to pay the payments that are left over after payroll taxes and other taxes are paid.

 

The CRFB study also says that the youngest retirees of today will be 71 years old, while the average retirement age will be reached by people who are 58 years old today.

 

The authors did warn, though, that the law limits distributions to new funds coming in once reserves are used up. This means that the program’s 70 million beneficiaries will have to take a 21% cut in their total benefits.

 

If the benefit cuts happen, millions of beneficiaries will need to know how much their benefits will be cut in order to plan and balance their budgets. This is because different retirees’ ages, work histories, and total earnings will lead to different benefit cuts.

 

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