The Social Security Administration will make a number of significant changes in 2025 that will affect both retirees and future beneficiaries.
This program, which provides income to millions of Americans, is critical to the personal economy, particularly for those who rely on it after leaving the workforce. Indeed, official statistics show that approximately 40% of retirees in the United States rely on Social Security for half of their income.
Thus, the year 2025 begins with significant developments in the field of pensions and benefits for Social Security beneficiaries in the United States, with the goal of increasing pensioners’ purchasing power in the face of price and product inflation in the shopping basket.
As a result, the areas where these innovations will be most noticeable will be those involving increases in monthly inflation benefits.
Main changes to the Social Security for 2025
One of the most significant changes will be an increase in monthly benefits due to the Cost of Living Adjustment (COLA). By 2025, this index is expected to boost benefits by 2.5%, partially offsetting the effects of inflation.
However, it is important to note that COLA is a lagging indicator, meaning it does not track price increases in real time. Also, since 1975, COLA has allowed benefits to be adjusted annually to the rate of inflation, assisting retirees in maintaining their purchasing power in the face of rising prices.
- Currently, the average monthly benefit is $1,920.
- With the COLA adjustment, this figure will rise to $1,968 per month.
On the other hand, one of the most significant changes in Social Security for 2025 is the retirement age in the United States. As a result, the Full Retirement Age, which determines when a beneficiary can receive all of their benefits, will also be adjusted.
It should be noted that, while it is possible to apply for benefits at age 62, doing so before reaching the FRA results in a 30% reduction in total benefits.
- Those born before 1958 will not experience any changes.
- For those born in 1959 or later, the FRA will increase to 66 years and 10 months, compared to 66 years and 8 months applied in 2024 for those born in 1958.
Finally, another significant change will be made to the limits on annual income before taxes or cuts are applied in the United States.
As a result, using data from 2024, it will be possible to compare what happened last year to what is expected to happen throughout 2025, when these measures will have already gone into effect and Social Security beneficiaries will face significant changes in the amounts of their benefits, which are granted monthly by the State.
- In 2024, the limit will be $22,320.
- In 2025, this amount will increase to $23,400, allowing for higher earnings without penalty.
- Those who apply for early retirement will be able to earn up to $62,160 a year before facing additional cuts from the SSA.
