Planned Social Security Changes for 2025 – Impact on Retirees’ Paychecks

Life is full of good times and challenges that can affect our lives. Even though change is essential to everyday life, some people may find it more difficult to cope with it than others. As changes happen in everyone’s life, so does Social Security, the federal agency in charge of delivering millions of payments to recipients from retirement, survivor, disability, and SSI benefits.

However, change is not always negative; next year, it might even be beneficial for Social Security. If you currently qualify for retirement benefits, know more about the upcoming changes for 2025 and how they will affect retiree paychecks.

Increases

Social Security payments typically receive an annual cost of living adjustment (COLA) to help retiree’s paychecks preserve purchasing power as life becomes more expensive. However, there is no assurance that there will be a COLA in any particular year. For one to occur, there must be inflation from one year to the next.

Fortunately, most of 2022 was marked by an exceptionally high rate of inflation. However, as of now, in 2024, annual increases in living expenses have continued to stay steady. This means that there will probably be some increase in Social Security benefits in 2025.

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The amount of that hike is still unknown, though, because the COLA for each January is determined using the inflation figures from the previous third quarter.

The nonpartisan Senior Citizens League has released a forecast, estimating that the Social Security COLA in 2025 will be 2.57%. Although that is less than the 3.2% increase beneficiaries received at the beginning of 2024, it is nonetheless a boost.

Maximum Payment

Not every employee pays Social Security taxes on their whole salary; therefore, higher incomes only contribute to the program for each dollar they make below a wage tax ceiling, which is modified annually. However, there is a maximum monthly payment that Social Security will pay, which is the other side of that coin.

The maximum monthly payment in 2024 for an individual who files a claim at full retirement age is $3,822, and $4,873 if they delay benefits.

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It is important to underscore that only those beneficiaries who meet the full retirement age, working history, and Social Security contributions requirements could be eligible to receive the maximum monthly benefit. Additionally, to receive the $4,873 payment, retired workers must have made contributions according to their maximum taxable earnings.

Besides these maximum monthly payments, retirees are also eligible to receive $2,710 if they claim benefits before reaching full retirement age and $1,900 on average.

Earnings Test Limit

Contrary to popular belief, you can work and collect Social Security at the same time. It is possible. But if you are working while getting benefits and you are not yet at full retirement age, you run the danger of having some of your benefits withheld if your income goes over what is referred to as the earnings-test limit.

This year, if you have not yet reached your full retirement age but plan to do so by the end of the calendar year, the earnings test maximum is $22,320 or $59,520.

Next year, these limits are likely to increase, which means you should have the leeway to earn a bit more money without having to worry about withholding Social Security. But just to be clear, you do not lose the percentage of your benefits that are withheld because you exceeded the earnings-test limit.

Once you are old enough to retire, the money will be placed back into your monthly checks. Moreover, remember that, depending on the circumstances, change can either be beneficial or detrimental.

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