Social Security is an important way for millions of people to get money, and it will continue to be an important source of support.
But even though Social Security has been around for a long time, it goes through changes every year, some of which can help members’ finances. It is expected that there will be two big changes in 2025 that could help seniors with their additional finances.
1. An Increase in Monthly Social Security Benefits
The goal is to keep retirees’ buying power by adjusting Social Security benefits every year to keep up with inflation. The cost-of-living adjustment (COLA) makes sure that beneficiaries’ wages keep up with the cost of living as it goes up over time.
In 2024, retirees got a small boost in their benefits thanks to a 3.2% COLA raise. But the high inflation rates of the past few years have slowed down since 2024. This makes experts think that the COLA for 2025 will be smaller than it was in 2024.
The exact COLA amount for 2025 has not been decided yet, but it is likely to be around 2.5%. However, this number could change. The official COLA number is based on inflation data from the third quarter of the year.
The exact number for September’s data has not been released yet, so it will not be available until October 10. For now, seniors can expect their monthly Social Security payments to go up, even if it is only by a small amount.
It is important to know that the only time Social Security benefits get a COLA is when prices go up. Benefits might not go up some years when inflation stays the same.
Still, inflation is still happening in 2025, even if it is at a lower rate than in previous years. This means that retirees can expect their monthly checks to go up, which will give them a small but welcome financial boost.
If the expected 2.5% COLA does not excite you, you might want to know that a smaller COLA also means less inflation, which means prices for goods and services are not going up as quickly.
On the other hand, this means that even though benefits may go up less, rising prices may not affect seniors as much.
2. A Higher Earnings-Test Limit
Along with the expected rise in monthly benefits, there is another good thing on the horizon: the earnings-test cap will be raised. People who get Social Security benefits and choose to keep working can do so without losing their benefits, but only if they have hit full retirement age (FRA).
There are no limits on how much retirees can earn after FRA. They can make any amount of money without affecting their Social Security payments.
People who start getting Social Security before they hit FRA, on the other hand, have to meet an earnings-test limit. If they make more than this amount, some of their perks may be taken away.
The limit for the earnings test in 2024 was set at $22,320 for people who had not yet hit FRA and $59,520 for people who would reach FRA that year.
With an eye on 2025, it is expected that these limits on wages will rise along with inflation. Just like the COLA number, the exact limits for the earnings test will be made public on October 10.
This raise in the earnings-test cap could let retirees earn more without having to worry about their Social Security payments going down if they work while getting benefits. This change could be especially helpful for people who depend on extra money to pay their bills.
Check the Social Security Administration‘s website on October 10 for the official numbers for both the COLA and earnings-test limits. This will help you stay up to date on these changes.
Even though these changes are small, they could have a big effect on the daily finances of people who count on Social Security as their main source of income.
