Several changes will happen next year that will affect people who get Social Security, whether they get Supplemental Security Income (SSI), Retirement, Survivors, or Disability Insurance (RSDI).
If you are retired or plan to retire soon, you need to have a plan for how you will get money in retirement. Under this plan, most people will depend on Social Security a lot, so it is important to know the most up-to-date information on payments.
The Social Security Administration (SSA) recently suggested a lot of big changes to the program that would begin in 2025.
One of these changes is an annual cost of living adjustment (COLA). These are some important changes to Social Security that will happen next year and things you should know about them.
Social Security benefits will change completely in 2025
People who get one of Social Security’s benefits—more than 72.5 million of them—look forward to changes to the program and its payouts every year.
The increase in the cost of living allowance (COLA) this year is less than the increase of 3.2% last year. Still, extra money is good for people who are already struggling to make ends meet. Here are the five changes that will happen to Social Security next year:
Social Security will increase monthly benefits by 2.5% due to COLA
According to the SSA, benefit checks will go up by 2.5% in 2025. The 2.5 percent change means that retired workers who get Social Security will get an extra $50 a month starting in January.
To be more specific, the average pensioner’s pay will go up from $1,927 to $1,976. The amount that a couple who both get benefits will pay will go up from $3,014 to $3,089, as planned.
The Social Security Administration has linked COLA changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)since 1975.
To find the COLA, the SSA compares the third-quarter CPI-W from last year to the third-quarter CPI-W for this year. The COLA is then changed to show how much the CPI-W changed from one year to the next.
The maximum taxable earnings limits will increase
In 2024, the most money that people had to pay in Social Security taxes was $168,600. Folks who pay into the system are taxed on income up to this amount, most of the time at a rate of 6.2%.
The highest wage will go up to $176,100 in 2025, which means that a bigger chunk of a worker’s salary will be taxed. The reason for this change is that the average wage in the US has gone up.
Maximum Social Security benefits also set to increase
The most a worker will get from Social Security will go up from $3,822 in 2024 to $4,018 when they reach full retirement age in 2025. People who leave at the full retirement age, which for people born after 1960 is 67, are subject to this cap.
If you retire before you hit full retirement age, your benefits will be less, so your maximum payout will be less. But people who wait to retire until after the full retirement age can get more money when they finally do retire.
Average spouse’s benefits and disability benefits will also increase
Overall, the average salary will go up in 2025, which will cover payments to widows and disabled people. Here’s how those numbers are broken down:
- According to the Social Security Administration, the average widowed mother with two children will experience an increase of $3,669 to $3,761.
- Aged widows and widowers living alone will see their payments rise from $1,788 to $1,832.
- The payment for a disabled worker with a spouse and one or more children will rise from $2,757 to $2,826.
Earnings test limits will be adjusted starting in January 2025
If you get Social Security benefits before you hit full retirement age and make more than a certain amount, the program may lower your payments.
If you are still working and want to get benefits, you may have to pass the retired earnings test, which can take a lot of money. Following numbers will not be subject to the retirement earnings test by 2025:
People who start getting Social Security benefits before they hit full retirement age in 2025 can earn up to $1,950 a month ($23,400 a year) before the Social Security Administration starts taking money out of their benefits.
So, in 2024, the most money that was not taxed was $1,860 a month, or $22,320 a year.
When you hit full retirement age, this rule will still apply, but only until the month of your full retirement age. After that, it will be much less strict. In 2024, the minimum monthly amount was $4,960, or $59,520 a year.
Also see:-Social Security makes major change to SSI check payments in November – Blame it on Black Friday
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