Social Security benefits undergo annual adjustments to ensure they keep up with inflation and wage growth. As the primary income source for many Americans over 65, it’s crucial for retirees and beneficiaries to stay updated on these changes to avoid financial missteps. Here’s what you need to know about upcoming changes to Social Security in 2025.
1. Social Security Benefits Will Receive a 2.5% COLA in 2025
Cost-of-living adjustments (COLAs) are essential for maintaining the purchasing power of Social Security benefits. COLAs ensure that benefits increase in line with inflation, preventing recipients from losing value over time. Without COLAs, beneficiaries would effectively receive less money each year as prices rise.
In 2025, Social Security benefits will increase by 2.5%. This means the average retired worker will receive an additional $49 per month, while the average spouse will get an extra $23 per month. While this increase is lower than the 10-year average of 2.75%, it’s still a positive change, although it may feel modest compared to the larger COLAs issued in the past few years.
2. Maximum Social Security Benefits Will Rise
The maximum benefit for retired workers is based on lifetime earnings and the age at which a person claims Social Security. As wages increase over time, the benefits formula is adjusted to reflect the rise in average wages.
In 2025, the maximum monthly benefit for new retirees will be higher than in previous years. However, few retirees will qualify for the maximum benefit, which requires earning above the maximum taxable earnings limit for 35 years. This is a rare accomplishment for most workers, but it highlights the importance of delaying your Social Security claim until age 70. This strategy can significantly increase your monthly benefit compared to claiming at the earliest possible age, 62.
3. Increased Retirement Earnings Test (RET) Limits
The Retirement Earnings Test (RET) applies to individuals who claim Social Security before reaching full retirement age (FRA). If your income exceeds certain thresholds, a portion of your benefits will be withheld. In 2025, there are two different RET limits:
- $23,400: This limit applies to those who are below FRA for the entire year. For every $2 earned above this limit, $1 in benefits will be withheld.
- $62,160: This limit applies to individuals who will reach FRA during the year. For every $3 earned above this limit, $1 in benefits will be withheld.
The key point to remember is that the benefit reduction is temporary. Once a person reaches FRA, these limits no longer apply, and any benefits withheld earlier are gradually repaid. This ensures that beneficiaries recoup the withheld benefits over their retirement years.
The Hidden Social Security Bonus
Many retirees miss out on a little-known Social Security opportunity that could boost their retirement income by as much as $22,924 per year. By learning how to optimize your Social Security benefits, you can ensure a more secure and comfortable retirement. Click here to discover more about these strategies.
By staying informed about these 2025 Social Security changes, you can make more strategic decisions and maximize your benefits as you plan for retirement.
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