In 2025, Social Security will change in a big way, but we have known about the specifics for weeks. The Social Security Administration (SSA) said in October that the cost-of-living adjustment (COLA) for the following year will be 2.5%.
Chances are you already know about the COLA news if you get Social Security benefits or will soon. But more changes to Social Security are also planned for 2025. Aside from the COLA, one of them may be the most important.
Social Security also warns about another major change that will affect retirees
Because Social Security offices were closed during the worst of the COVID pandemic, there will be one fairly normal change to the program in the new year.
The SSA told people who needed help to make appointments ahead of time for when those locations reopened in April 2022. You will have to follow this suggestion at the very least by 2025. Starting January 6, 2025, anyone who wants to get help from a field office will have to make an appointment.
The amount of income that counts toward the Social Security portion of the FICA tax in 2024 is capped at $168,600 per year. For example, if you are an American, your maximum taxable income will go up to $176,100 next year.
If you start getting benefits before your full retirement age (FRA) and keep working and make more than a certain amount, Social Security may temporarily “claw back” some of your benefits.
For every $3 you make over $22,320 in 2024, $1 is taken out of your benefit. If you are under full retirement age for the whole year of 2024, benefits will be cut off by $1 for every $3 you earn more than $59,520.
These earnings caps for early retirees who still work will go up in 2025. The new top amount will be $23,400, not $22,320. It used to be $59,520 but now it is $62,160. The FRA has grown by two months every year for the past few years.
It will do it again in 2025. If you were born in 1958, your FRA will be 66 years and 8 months. If you were born in 1959, it will be 66 years and 10 months. If you were born after 1960, your FRA is 67.
The major change that might be on the way for Social Security
The changes we have already talked about affect some people, but the COLA affects everyone who gets Social Security. Next year, not everyone will need an SSA field office.
The higher maximum taxable income will not have an effect on most people because they do not make enough money. Some people decide to retire early, while others choose to work longer. Still, remember that the full retirement age increase will only affect people who were born in 1958 or 1959.
Things will change again for the better in Social Security next year, though. I would say that, besides the COLA, it is the most important change that is being worked on.
If you want to get Social Security payments when you retire, you need to have earned at least 40 credits, which the SSA calls “quarters of coverage.” At the moment, each person can earn up to four credits per year, and each credit costs around $1,730. The amount needed to get a credit will go up by $80 the following year, to $1,810.
That being said, this change might not seem important, so most people probably would not even notice it. Anyone who works and is not already eligible for retirement benefits would be affected, though.
“If you do not have enough credits, we cannot pay benefits to you,” the SSA website says. Any change to the rules for getting Social Security benefits is a big deal in my professional opinion.
