As the end of the year draws near, there will be some new changes that will mean something different for everyone who gets Social Security.
As recipients, we sometimes only think about the payout and when it will come.
But it is important to learn more about how the Social Security Administration (SSA) works and how they plan to make things better, since any change in SSA policy will affect your benefits in some way.
Once the election season is over, the media will turn their attention to the new rules that will affect Social Security.
However, it is still too early to tell how much your Social Security benefits will change in the coming months. Still, at least three changes have been found that will have a direct effect on your benefits. Read this article to learn more about this subject.
What would Social Security do about your benefits in 2025?
The first and most important change is the annual adjustment that Social Security benefits get across all programs.
This changes not only the amount received, but also other reference amounts that are used to decide who is eligible or how much Social Security taxes a person has to pay.
This is about COLA, which stands for “cost-of-living adjustment.” When it was announced that the rate hike for 2025 would be 2.5%, you might have thought the story would end. But this is only a part of the story; it will have an effect on 2025.
But with the start of a new year come hopes for how the COLA calculation for 2025 will go. To understand it better, you need to give yourself a crash course in how it works.
Since 1975, COLA has been used to make sure that Social Security benefits go up instead of relying on laws made by Congress, which may or may not happen every year depending on how hard it is for them.
The main reason an index was made to change the values of Social Security benefits was to keep up with inflation.
As time goes on, the goods and services that retirees and other beneficiaries (like disabled people or kids on benefits) get will grow. If they do not get changes to their benefits, the main reason the SSA exists will no longer exist.
There is no point in having a federal agency whose job it is to fight poverty if the money spent does not make things better.
To find the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a consumer price index, for the third quarter of each year and compare it to the exact figure from the previous year.
This gives the percentage known as COLA, which was confirmed on October 10th and set at 2.5% for 2025.
How much tax money is going to be collected for Social Security?
You might be surprised to learn that the COLA also had an effect on the maximum amount of taxable income, which is another important issue that will change next year.
This may sound like a big name, but it refers to how much of your yearly income can be used to figure out how much you need to pay the SSA to be “insured.”
This means that you will be able to use the retirement or other SSA programs that are linked to Social Security taxes. The value right now is $168,000.
But in 2025, the COLA will go up to $176,100, which means you will have to pay more taxes because a bigger chunk of your income will be taxed.
Why do some beneficiaries decide to delay their Social Security benefits?
The vast majority of people are not aware of this situation. If you decide to retire before you turn 70 years old, at age 62, the Social Security Administration will take some of your payment.
If you retire with more money than $22,320, you will keep $1 for every $2 you earn. In 2025, though, the most you can earn in a year will be $23,400, or $1,950 a month.
