In August 2024, more than 51 million retired Americans got Social Security checks. Many of them depend on this money to meet their basic needs.
Gallup says that for almost 90% of retired workers, Social Security is an important way to make money.
But not knowing about the program can cause mistakes with money and less spending power in retirement. This shows how important it is to know about changes to Social Security.
Cost-of-Living Adjustment (COLA) for Social Security Benefits
Cost-of-living adjustments (COLAs) are made to Social Security earnings every year to keep them in line with inflation. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is used to figure out these price hikes.
According to Gallup, inflation has been Americans’ biggest worry about money for the past three years, which makes the 2025 COLA even more important.
The percentage change in the CPI-W during the third quarter of 2024, especially between July and September, will be used to figure out the COLA for 2025.
On October 10, at 8:30 a.m. ET, the Bureau of Labor Statistics will release the September CPI-W statistics.
Soon after, the Social Security Administration (SSA) will release the official 2025 COLA. The current information about the 2024 COLA will be replaced by this information, which will be available online.
People who get Social Security will also get a COLA letter in the mail in December with their new payment amounts. They can also see the updated information in their my Social Security account.
The Senior Citizens League predicts that benefits will go up by 2.5% in 2025. Benefit users can use this prediction to get a rough idea of how much extra money they will get next year.
Increase in Full Retirement Age (FRA)
The age at which you can retire fully from Social Security will go up in 2025. FRA is the age at which retirees get their full main insurance amount (PIA), and it changes based on the year they were born.
People born in the second half of 1957 reached their FRA at 66 years and 6 months, and people born in the first four months of 1958 reached their FRA at 66 years and 8 months. Together, they made up two groups.
In 2025, the FRA will go up even more. It will be FRA for people born in the last eight months of 1958 in the first eight months of 2025. They will be 66 years and 8 months old.
People who were born in the first two months of 1959 will reach FRA in the last two months of 2025, when they are 66 years and 10 months old.
It is very important to know how FRA will affect Social Security payments. Social Security benefits can be claimed by workers as early as age 62, but they will not get their full PIA until their FRA.
If benefits are claimed before FRA, the monthly payment is lowered. On the other hand, delaying claims past FRA until age 70 leads to bigger rewards. Whether the amount goes down or up depends on how soon or late the claim is made.
Withholding of Benefits for Retired Workers Under FRA
Workers can start getting Social Security benefits at age 62, but some benefits are withheld from people who make more than a certain amount of money before they hit FRA.
The RET has two exemption amounts: a smaller limit for people who will not reach FRA during the year and a higher limit for people who will. These thresholds are part of the RET.
Under the lower limit, retired workers who earned less than FRA for the whole year will have $1 taken out of their benefits for every $2 they made above that level.
For people who reach FRA during the year, payments will be cut by $1 for every $3 they earn above the main limit. Along with the COLA, the official RET limits for 2025 will be released.
However, the Trustees of Social Security expect the lower limit to rise to $23,280 (from $22,320) and the higher limit to rise to $61,800 (from $59,520).
The RET does not apply after the FRA is met, so people who get benefits can earn any amount without having their benefits cut. It is important to note that benefits that are withheld are not lost forever; they are added back into monthly payouts after FRA.
This means that most beneficiaries can get back the amounts that were withheld over the course of their retirement.
