The Social Security Administration just recently announced four big changes that will affect more than 70 million people in the US who get Social Security. A little more than 51 million of them were retired workers.
For people aged 65 and up, Social Security is a big source of income. In fact, for 12% of men and 15% of women, monthly payments make up at least 90% of their income.
There have been changes to Social Security every year, even though it has been around for more than 100 years. So, we would like to talk about the most important changes that will happen in 2025.
4 Social Security changes that will impact retirees in the US
Beneficiaries will get a 2.5% COLA boost in their Social Security checks
Every year, people who get benefits can get the cost-of-living adjustment (COLA), which is based on inflation. Because inflation was lower in 2024, benefits will go up by a small amount in 2025.
After this change goes into effect, the average monthly retirement benefit will go up from $1,927 to $1,976. But the 2025 COLA might only help people who are retired. It is not just that the price rise is not that big.
Instead, it is because the annual increases in the program do not always meet the financial needs of seniors. The Senior Citizens League says that since 2000, Social Security recipients’ purchasing power will have dropped by 36% by 2023.
The SSA will set a taxable maximum of $176,100
A separate payroll tax is paid by workers to Social Security. Unlike federal and state taxes, these taxes are based on all income. Social Security, on the other hand, only taxes a certain amount of income each year.
People who make the first $176,100 in 2025 will have to pay $176,100 in payroll taxes. It is more than the $208,600 in 2024. People who work for themselves pay all of their taxes, but people who get paid a salary and their employers each pay an equal amount.
People who will have to pay more in taxes in the new year might be able to lessen their burden by putting more money into a traditional IRA. This saves them money on taxes on a portion of their income.
An increase in earnings test-exempt amounts
Seniors will still get money from Social Security as long as they keep working. But people in this boat who have not reached full retirement age (FRA) yet have to pass an earnings test.
In 2024, the earnings test exemption was $22,320. In 2025, it will be $23,400. This means that people who get Social Security can make up to $23,400 a year without losing any of their benefits.
After that, for every $2 earned, $1 will be taken out as Social Security benefits.
Please keep in mind, though, that seniors who retire later in 2025 will have a better chance of getting an exemption from the earnings test. That way, someone could make up to $62,160, which is more than the $59,520 in 2024, and still get Social Security payments.
After that, $1 of every $3 earned is taken out as Social Security benefits. When participants reach full retirement age, they get back the benefits that were withheld.
Earning a working credit will be harder
When people reach a certain age, they do not automatically get retirement benefits. Instead, people get benefits from paying taxes on their wages and getting credits for it.
Employees can get up to four credits a year from the Social Security Administration. These credits would fully cover them under the program. But over time, the amount of earnings that come with a single credit can change.
A work credit is now worth $1,730, but in 2025 it will be worth $1,810. If people who only work a few hours a week want to get four credits for the year, they should keep track of how much they make.
Also see:-Goodbye to Social Security checks – Retirees will receive no money between these November dates
