Changes are coming to Social Security with the new year, and while some changes are unavoidable, some will be preferred by program beneficiaries.
This is especially concerning if, like more than 40% of baby boomers, your benefit is or will be your primary source of income in retirement. Keeping up with the program’s ebbs and flows will result in a smooth transition and a more pleasant retirement.
These are a few of the expected changes:
1. The COLA is increasing
Beginning in January, benefits will increase by 2.5% due to the cost-of-living adjustment (COLA). For the average retiree earning somewhat more than $1,900 per month, this is a $50 increase per month.
This is the smallest COLA since 2021 and far smaller than the large hikes of 5.9% in 2022, 8.7% in 2023, and 3.2% in 2024, but on the good side, it indicates that inflation is finally slowing down after the epidemic caused havoc on the economy.
COLAs are closely related to inflation, which explains the dramatic increases during the years when costs were rapidly rising. For background, according to the Bureau of Labor Statistics, inflation reached a 40-year high of 9.1% in June 2022 but has subsequently fallen to 2.6% by October 2024.
While some retirees may be unhappy by the reduced rise, the decline in inflation could be a blessing, since cheaper prices allow retirees to stretch their money longer, perhaps softening the impact of a more modest adjustment.
2. The Social Security earnings test limits are increasing
Working while collecting benefits is feasible, contrary to popular opinion. The difficulty is that, depending on your income, a portion of your benefits check may be withheld due to what is known as the retirement earnings test. This only applies while you are under your full retirement age (FRA); once you reach it, you can continue working and receiving full benefits.
According to the Social Security Administration (SSA), there are two distinct limits based on whether or not you will reach your FRA by 2025. Both of these income restrictions will rise in 2025, allowing you to earn more before receiving benefit reductions.
| Income Limit: 2024 | Income Limit: 2025 | Benefit Reduction | |
| If you will not
reach your FRA in 2025 |
$22,320 | $23,400 | $1 for every $2 over the limit |
| If you will
reach your FRA in 2025 |
$59,520 | $62,160 | $1 for every $3 over the limit |
3. Both the Maximum benefit and the maximum taxable earnings limit are increasing
Once the COLA is added to the maximum amount, the beneficiaries who qualify will see their monthly benefit increase from $4,873 to $5,108. To qualify for benefits, you must have waited until you turned 70 and earned the maximum taxable earnings limit for all 35 years considered by the SSA when you retire.
While this is wonderful news for individuals who receive the benefit, it may not be so good for those who want to do it because the maximum taxable earnings cap is also increasing, making things a little more confusing for the typical American.
In 2024, the highest taxable earnings limit is $168,600 per year; anything above this amount is not taxed; in 2025, it will rise to $176,100 annually. This means that for people earning between 2024 and 2025, their taxes will rise with each new year.
Although it may appear to be terrible news, earnings are rising, and the more money paid into Social Security, the better the system will function.
Also See:- SNAP Benefits in November: Up to $1,756 for Families, December Payments Could Reach $3,516