Current Social Security claimants are almost certainly aware of the changes that will occur by 2025. After all, the program changes on a yearly basis, albeit in little ways, and those who are accustomed to dealing with changes are no longer surprised.
Those who join the Social Security Administration this year may be less familiar with the inner workings of the programs it oversees and the yearly revisions they must make to stay current.
Here are some of the changes that are coming in 2025
Cost of living Adjustment of Social Security benefits and Medicare
Every year, benefits undergo a cost-of-living adjustment (COLA) to guarantee that beneficiaries do not lose purchasing power and can maintain their level of living. This year’s COLA (calculated using the CPI-W from the third quarter of the year) has been set at 2.5%.
This little boost can be beneficial to seniors since it indicates that inflation is finally decreasing, and, contrary to popular assumption, it is consistent with other rises witnessed over the last decade, averaging 2.6%, which is only 0.1% lower than the norm.
For those who aren’t sure what that means, the average monthly Social Security retirement benefits will increase by $48 and $39 for disabled workers.
Unfortunately, benefits are not the only thing that is growing, and if that COLA appears insufficient to some, it will be exacerbated by the fact that Medicare premiums are rising, particularly Part B, which is rising from $174.70 a month to $185. Medicare premiums are deducted from Social Security pensions before they reach claimants’ accounts, so most of them will see a lesser rise.
However, other changes occur with the start of the new year. Medicare premiums are increasing, as they do almost every year, from $174.70 per month to $185. That additional tax will reduce the Social Security payment rise.
The earnings test limit is increasing
These are wonderful news for those who continue to earn money while getting retirement benefits. These workers are subject to what is known as the Earnings Test Limit, which implies that any income earned above a specific amount reduces their benefits. How much depends on whether or not you reach full retirement age in 2025.
Earning limitations for people who will not reach full retirement age in 2025 are $23,400, with a $1 reduction for every $2 over the maximum applied to benefits. For people turning full retirement age in 2025, the yearly exempt amount is $62,160, with benefits reduced by $1 for every $3 over the limit.
Higher maximum benefit
Every year, the Social Security Administration increases the maximum benefit amount to cover all forms of benefits. The most well-known is the retirement pension, which will rise to $5,108 per month in 2025 from $4,873 in 2024.
To receive this maximum benefit, you must meet stringent qualifying requirements, including working at least 35 years and regularly earning at or above the maximum taxable limit, which is set at $176,100 next year. To receive the maximum payout, recipients must delay benefits until they reach the age of 70.
For those who began receiving benefits earlier, the maximum monthly amounts are smaller. At age 62, the maximum is $2,831, while those starting at age 67 can get up to $4,043. Delaying benefits continues to provide major financial advantages.
