Big Changes Coming To Social Security Payments – New Monthly Amounts Start January 1

The Social Security Cost of Living Adjustment (COLA) for 2025 has sparked significant discussion among retirees and financial experts. With an increase of only 2.5%, many were left disappointed compared to 2023’s 8.7% boost.

However, financial expert Suze Orman views this modest adjustment as a positive development, suggesting that it reflects progress toward economic stability.

According to Orman, “A smaller inflation adjustment can feel disappointing… but it’s actually good news, as it reflects that we are no longer dealing with basic expenses rising at a fast rate.” Let’s look into why this adjustment benefits retirees and how they can better navigate their Social Security benefits.

Benefits

Social Security is designed to help retirees maintain their purchasing power as costs change. Unlike IRAs or 401(k)s, Social Security provides guaranteed inflation-adjusted benefits. Orman explains that while other investments may offer higher returns, they don’t come with built-in safeguards against rising expenses.

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Even with smaller adjustments, retirees are better protected from inflation through Social Security’s annual COLA. Orman also emphasizes that waiting to claim benefits allows for larger monthly payments, thanks to delayed retirement credits.

Delayed Claims

Claiming Social Security benefits early might seem tempting, especially during high COLA years. However, waiting until full retirement age (66 or 67) or even age 70 can substantially increase monthly benefits. Delayed claims not only boost your overall payout but also include annual COLA adjustments, even if you haven’t started collecting.

Orman highlights this: “So now you have one less reason to feel the itch to claim an early (reduced) Social Security benefit.”

Income Limits

For retirees still in the workforce, it’s essential to consider Social Security’s earnings limit. In 2025, benefits will be reduced by $1 for every $2 earned over $23,400 if you haven’t reached full retirement age. Once you hit full retirement age, this limit increases to $62,160, and withheld benefits are recalculated and restored.

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This earnings test is temporary, and any withheld benefits are eventually returned after reaching full retirement age.

Wage Base

The Social Security wage base—the maximum income subject to Social Security tax—will rise to $176,100 in 2025. This change affects both workers and employers. For future retirees, knowing this cap is crucial for estimating benefits and planning contributions more effectively.

Smart Retirement

Suze Orman stresses the importance of staying informed. Changes in COLA, income limits, and wage bases can impact retirement strategies. Planning with these updates in mind can make retirement smoother and less stressful. While the smaller COLA might feel underwhelming, it signals economic progress and more predictable expenses for retirees in the long term.

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