Whether you are already retired or are hoping to retire soon, you need to make a plan for your retirement income. It is important to know about the current benefits because for most people, Social Security will be a big part of their plan.
The Social Security Administration (SSA) recently suggested some big changes to the program that would begin in 2025.
One of these changes is a yearly cost-of-living adjustment. These are some important changes to Social Security that will happen next year and things you should know about them.
List of all changes that will impact Social Security checks following the COLA increase
With almost 72,500,000 people receiving benefits from Social Security, changes to the program and how it pays out benefits are always eagerly anticipated.
This year’s cost-of-living adjustment (COLA) was set at 2.5%, which is less than last year’s increase of 3.2%. Any extra money is still welcome for people who are living on a fixed income.
Beneficiaries will receive increased Social Security checks due to the 2.5% COLA
Benefit checks from Social Security will go up by 2.5% in 2025, according to the agency in charge of them. The 2.5 percent change will mean that retired workers will get an extra $50 a month in Social Security payments starting in January.
In particular, the average check for a retired worker will go up from $1,927 to $1,976. For a couple where both people get benefits, the expected amount will go up from $3,014 to $3,089 per month.
Since 1975, the Social Security Administration has linked raises in COLA to the Consumer Price Index for wage earners and office workers in cities (CPI-W).
To find the COLA, the SSA compares the CPI-W for the third quarter of this year to the same quarter the previous year. Next, the COLA is changed based on the percentage difference in the CPI-W from one year to the next.
Maximum taxable earnings will increase for retirees and disabled people
In 2024, the most money that was taxed by Social Security was $168,600. This means that workers who pay into the system are taxed on their wages up to this amount, which is generally 6.2%.
The top wage will go up to $176,100 in 2025, which means that more of a worker’s salary will be taxed. This change happened because the average wage in the US went up (see below).
Maximum Social Security benefits for all beneficiaries will rise
In 2025, the highest amount of Social Security a worker who is full retirement age will get will go up from $3,822 in 2024 to $4,018. This limit is for people who are fully retired, which for people born after 1960 is 67 years old.
When people retire before they hit full retirement age, their benefits are lowered, which means that the maximum payout will be less. On the other hand, people who wait to leave and do so after the full retirement age can get the most out of their benefits.
New average benefits for spouses and disabled workers in the US
In 2025, the average income will go up for everyone, including disabled people, widows, and widowers. That number is broken down like this:
- The Social Security Administration estimates that the average widow who has two children will get an increase from $3,669 to $3,761.
- Payments will increase from $1,788 to $1,832 for aged widows and widowers living alone.
- Payments will increase from $2,757 to $2,826 for a disabled worker with a spouse and one or more children.
Social Security adjusts earnings test exempt amounts
It is possible for Social Security to lower your payouts if you start getting them before you reach full retirement age and your earnings are above certain levels.
People who are still working may see their benefits cut by a lot if they pass this test, which is called the retiring earnings test. In 2025, the following amounts will not be subject to the retirement salary test:
People who start getting Social Security before they reach full retirement age can earn up to $1,950 a month ($23,400 a year) in 2025 before the SSA starts withholding funds at a rate of $1 for every $2 earned above the limit.
The rule will stay in place until 2025, when the full retirement age is reached, but with less strict rules.
You can make up to $5,180 a month ($62,160 a year) before your benefits are cut off. For every $3 you make over the cap, you get $1 in benefits instead of every $2. In 2024, the ceiling was $4,960 a month, or $59,520 a year.
