As we approach 2025, the Social Security Administration (SSA) has announced several important changes to the program that will affect millions of beneficiaries. These updates are designed to keep pace with the changing economic landscape and ensure that retirees and other recipients can maintain their quality of life. Here’s a comprehensive look at the four major changes coming to Social Security in 2025.
- Cost-of-Living Adjustment (COLA) Increase
The most anticipated change each year is the Cost-of-Living Adjustment (COLA), which helps benefits keep up with inflation. For 2025, the SSA has announced a 2.5% increase in benefits. While this is lower than the 3.2% adjustment seen in the previous year, it still represents a welcome boost for beneficiaries.
What does this mean in real terms? The average monthly benefit for retired workers, according to a Bankrate article, will increase from $1,927 to $1,976, an additional $50 per month. For couples where both partners receive benefits, the estimated payment will rise from $3,014 to $3,089. This adjustment aims to help recipients maintain their purchasing power in the face of rising costs.
- Higher Maximum Taxable Earnings
For working individuals, it’s important to know that the maximum amount of earnings subject to Social Security taxes will increase in 2025. The cap will rise from $168,600 in 2024 to $176,100 in 2025. This means that high-earning workers will pay Social Security taxes on a larger portion of their income. The standard tax rate remains at 6.2% for employees, with employers matching this amount.
This change reflects the increase in average wages across the United States and helps to ensure the long-term sustainability of the Social Security program by bringing more revenue into the system.
- Increased Maximum Social Security Benefit
For those retiring at full retirement age in 2025, the maximum Social Security benefit will increase from $3,822 to $4,018 per month. It’s important to note that this maximum applies only to those who retire at their full retirement age, which is 67 for anyone born after 1960.
Retirees should remember that claiming benefits before full retirement age results in reduced payments, while delaying retirement can increase the maximum benefit amount.
- Still Working? Know the Adjusted Earnings Exempt Amounts
For those who claim Social Security benefits before reaching full retirement age and continue to work, the retirement earnings test comes into play. In 2025, recipients can earn up to $1,950 per month ($23,400 annually) before the SSA starts withholding benefits. This is an increase from the 2024 limit of $1,860 per month.
For individuals reaching full retirement age in 2025, the exempt amount is higher. They can earn up to $5,180 per month ($62,160 annually) in the months before reaching full retirement age. After that, there’s no additional withholding of earnings.
Planning for Your Future
As you prepare for retirement or adjust your current retirement strategy, consider how these changes might affect your income. It’s always wise to consult with a financial advisor who can help you maximize your Social Security benefits and integrate them into your overall retirement plan.
Remember, Social Security is just one piece of the retirement puzzle. A well-rounded retirement strategy should also include personal savings, investments, and possibly pensions or other income sources. By staying informed and planning ahead, you can ensure that you’re making the most of your Social Security benefits in 2025 and beyond. Click HERE to reach out to one of our professionals at Tushaus Wealth Management today for a complimentary review of your finances.
