Since 1935, Social Security has given monthly benefits to millions of Americans. This makes sure that all retirees, survivors, disabled people, and people who get Supplemental Security Income (SSI) have enough money to pay for things like housing, food, medical care, transportation, entertainment, and more.
But after so many years, the federal body needs to keep changing to be able to deal with new problems as they come up. For example, the Social Security Administration just confirmed some changes that will soon have an effect on the monthly payments that retirees get. If you are eligible for retirement benefits, read on to learn more about the key changes and how they might affect you.
3 Social Security changes that will impact retirees and other beneficiaries’ paychecks
Social Security benefits could rise between 2.5% and 3% in 2025
Cost-of-living adjustments (COLA) are usually made to Social Security checks once a year to help them keep their buying power as prices rise. But there is no promise that there will be a COLA in any given year.
Inflation must happen from one year to the next for one to happen. Thank goodness that most of 2022 has been marked by an extremely high rate of inflation. But as of 2024, the cost of life has not changed much from year to year. In other words, it’s likely that Social Security earnings will go up a little next year.
The exact amount of the raise is still unknown because the COLA for January is based on inflation rates from the third quarter of the previous year.
A new prediction from the independent Senior Citizens League says that the Social Security COLA will reach 2.57 percent in 2025. People who get it will still feel better, even though it’s not as much as the 3.2% increase they got at the start of 2024.
The Social Security earnings test limit should increase for beneficiaries
People often think that you can’t work and get Social Security benefits at the same time, but it is doable. You could lose some of your Social Security, though, if you work while getting benefits and your earnings go over a certain limit (called the “earnings test limit”) and you are under your full retirement age.
This year, the earnings test limit is $22,320. If you have not yet hit your full retirement age but plan to do so before the end of the year, the limit is $59,520.
These limits are likely to go up next year, so you should be able to make a little more cash without having to worry about your Social Security payments being taken away. To be clear, you will not lose the part of your benefits that were taken away because you made too much money.
The money will be added back to your monthly paychecks when you hit retirement age. It depends on the situation whether changes are good or bad. Seniors can look forward to some good changes in 2025, especially when it comes to Social Security.
The maximum Social Security benefit will also increase next year
Not every worker pays Social Security taxes on their whole salary. The wage tax has a cap that changes every year. People with better incomes only pay into the program for every dollar they make below the cap. The other side of that coin is that the government agency will only pay up to a certain amount each month.
In 2024, the most a person can get each month if they file a claim when they are full retirement age is $3,822. But that number will probably go up by 2025. People with higher incomes are the only ones who can make the largest weekly payment. While that is true, you will get a big advantage if you are in that situation and plan to retire in 2025.