Cost-of-living adjustments (COLAs), Social Security taxes, general program requirements, and even raising the retirement age are just some of the things that the federal government changes about Social Security every year.
Since it’s already halfway through the year, recipients need to start learning more about the changes that might happen in January 2025. If you get retirement, survivors, or disability benefits now, read this to learn about the changes that will happen in 2025 that will affect beneficiaries, especially seniors.
The total restructuring of Social Security by 2025 comes with 3 significant changes
Higher-income Americans will pay more in Social Security taxes
Payroll taxes bring in most of Social Security’s money, but people who make more money may not put all of their money into the program.
Instead, the higher of the yearly earnings limit or the amount of money that is taxed under Social Security. The current annual earnings limit is $168,600. That is, a person who makes $200,000 a year will not have to pay Social Security taxes on the last $31,400 of their income.
The Social Security earnings cap, on the other hand, is raised every year to keep up with wage and inflation increases. The amount of extra taxes that people with better incomes have to pay will stay the same until 2025.
If the Social Security payroll tax cap is going to change how you pay your taxes, you should talk to your accountant right away. Some examples are putting as much money as possible into retirement accounts or using investment losses to offset regular income in a smart way.
The qualifications for monthly benefits will be more stringent for candidates
It’s not automatic for seniors to get monthly benefits once they hit a certain age. You must earn 40 work credits over the course of your career, with no more than four credits per year, in order to be eligible for retirement benefits.
One work credit will be worth $1,730 in 2024. But this level is expected to go up by 2025. You might want to work more hours if you work part-time and want to be able to get Social Security payments. This will make sure that you get the right number of points.
Full-time workers will not be hurt by a rise in the value of a Social Security work credit. A full-time minimum-wage worker should have more than enough money to earn four work points by 2025, even if that number goes up a lot.
These are just a few of the changes that could happen to Social Security in 2025. Whether you are retired or not, it is a good idea to keep an eye on the show and know what’s coming up. Now is the time to protect your money if you think any of these changes will affect it. This could mean coming up with a tax plan or taking cash steps.
Social Security benefits increase next year to be lower than expected
Cost-of-living adjustments, or COLAs, may be given to recipients every year. The main goal of COLAs is to help seniors keep their buying power as prices rise because of inflation. Because inflation was so high in 2023, Social Security payments went up by 8.7% that year and 3.2% the next as a result.
The COLA probably won’t be as big in 2019 though. The 2025 COLA is likely to go up by 2.63 percent the following year. The monthly price is still not the lowest ever, even though the increase is smaller than the ones that came before.
COLAs are figured out using data from the third quarter of inflation. We aren’t even in July yet, so it’s too early to say what the exact Social Security increase will be in 2025. But the estimate of 2.63% should help you know what to expect if you are already getting tax breaks.
If you’re not happy with the number, you can start making changes right away. For example, you could cut back on certain expenses or look for work in the gig economy to make more money.