Retirees are keeping a close eye on potential Social Security changes set for 2025. With a focus on maintaining the purchasing power of retirees’ paychecks amidst rising living expenses, several key updates are on the horizon. Here are three significant Social Security changes expected in the coming year:
1. Annual Cost of Living Adjustment (COLA)
As reported by U.S. News, Social Security payments typically receive an annual cost of living adjustment (COLA) to help retirees cope with inflation.
While there is no guarantee of a COLA each year, the adjustment depends on inflation from one year to the next. With most of 2022 experiencing exceptionally high inflation rates, and 2024 seeing steady increases in living expenses, a COLA is anticipated for 2025.
The nonpartisan Senior Citizens League has forecasted a 2.57% COLA for 2025. Although this is slightly less than the 3.2% increase beneficiaries received at the start of 2024, it still represents a notable boost.
The exact amount of the increase will be determined based on inflation figures from the third quarter of the previous year.
2. Increase in Maximum Monthly Benefits
Social Security benefits have a cap, and not every employee pays Social Security taxes on their entire salary due to a wage tax ceiling that adjusts annually.
For 2024, the maximum monthly payment for an individual claiming benefits at full retirement age is $3,822. If benefits are delayed, this amount can increase to $4,873.
To qualify for the maximum monthly benefit, retirees must meet specific criteria, including reaching full retirement age, having a sufficient working history, and making Social Security contributions based on maximum taxable earnings. report from Yahoo.
Besides these maximum payments, retirees who claim benefits before reaching full retirement age can receive $2,710, while the average benefit is around $1,900.
3. Increase in the Social Security Earnings Test Limit
Contrary to popular belief, it is possible to work while collecting Social Security benefits. However, for those who have not yet reached full retirement age, there is an earnings-test limit.
In 2024, this limit is set at $22,320 or $59,520 for those reaching full retirement age by year-end.
In 2025, these limits are expected to increase, allowing retirees to earn more without having their benefits withheld. It’s important to note that any benefits withheld due to exceeding the earnings-test limit are not lost permanently.
Once the retiree reaches full retirement age, the withheld money will be recalculated and added back to their monthly checks.
These upcoming changes underscore the importance of staying informed about Social Security adjustments. told by NBC News.
Retirees should plan accordingly to maximize their benefits and navigate the evolving landscape of Social Security regulations.
