People are paying more attention to the presidential candidates and how they might affect the future of Social Security because of the upcoming election in November. But, no matter who wins the election for president or which party rules Congress, the program will be changed in a number of important ways in 2025.
No matter what happens in politics, the following five parts of the scheme will change:
Adjustments to Retirees’ Social Security Payments
One of the most important changes that will happen in 2025 will help retirees who are already getting Social Security income. These payments are likely to go up next year because the scheme includes automatic cost-of-living adjustments (COLAs). By changing benefits based on inflation, COLAs are meant to help retirees keep their buying power.
The COLA amount is set by a system that keeps track of changes in a certain consumer price index, which is a way to measure inflation. As prices of goods and services go up, so will Social Security payments.
This will help retirees keep up with the cost of living. Analysts think that the COLA for 2025 might be around 2.6%, but the exact number won’t be known until October, when data from the third quarter of the year is analyzed.
Increased Earnings Required for Work Credits
To get Social Security payments, you need to earn “work credits.” You can do this by working and paying Social Security taxes. A person must earn 40 work credits before they can get Social Security payments. Each year, they can earn no more than four credits.
In 2024, you’ll need to make $1,730 a year to get one work credit. That means that if you make $6,920 a year, you’ll get all four credits. This income level is changed every year to reflect changes in pay. This makes sure that the value of work credits keeps up with wage growth.
In contrast, the minimum wage to get one job credit was a little lower in 2023, at $1,640. It’s important for workers with smaller incomes to keep an eye on these yearly changes. Should you not earn the required 40 work credits, you might not be able to get benefits when you hit retirement age.
Earnings Limits and the Impact on Social Security Benefits
Anyone who has hit full retirement age can work as much as they want without affecting their Social Security benefits. In 2025, this will not change. That being said, things are different for people who have not yet hit full retirement age.
If you make more than a certain amount, your Social Security payments will go down. Even though these lower benefits are later adjusted and restored when the person reaches full retirement age, the effect right away can be big, possibly lowering or even stopping Social Security payments for a while.
The amount of money that a person makes before their benefits start to decrease is changed every year based on inflation. This amount is capped at $22,320 in 2024. The 2025 level has not been announced yet, but it is likely to go up, which will let people make more money without losing their benefits. This change is especially helpful for people who want to keep working while still getting help from the program.
Changes to the Age for Claiming Full Benefits
In 2025, there will be another big change in the age at which people can get full Social Security payments without having to pay any fees.
People who turn 66 in 2024 can start getting full benefits at 66 years and 8 months. However, people who turn 66 in 2025 will be able to retire at the full age of 66 years and 10 months. If you start getting benefits before you hit the new full retirement age, you will be penalized, which will lower the amount of money you get each month.
The law that started this slow rise in the full retirement age was passed in 1983. The goal of this law was to fix Social Security’s money problems by gradually raising the retiring age over time. This would help the program last for a long time.
Increased Income Subject to Social Security Tax
For people with higher incomes, the amount of their salary that is taxed by Social Security will change in 2025.
When it comes to Social Security, taxes are only taken out of pay up to a certain limit, which is changed every year to account for inflation. The most that can be earned is $168,600 in 2024. Since this limit is tied to inflation, it will go up in 2025. If a person makes more than the higher limit, more of their income will be taxed by Social Security.
These upcoming changes will affect seniors and future retirees no matter who wins the 2024 election. They are caused by changes in prices and long-standing laws. People should make plans ahead of time for these changes because of this.